<PAGE>
As filed with the Securities and Exchange Commission
on June 30, 1999
Registration No. 33-42927; 811-6419
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 55 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 56 [X]
(Check appropriate box or boxes)
________________________
STAGECOACH FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant
to Rule 485(b), or
[_] on _________ pursuant
to Rule 485(b)
[_] 60 days after filing pursuant
to Rule 485(a)(1), or
[_] on _________ pursuant
to Rule 485(a)(1)
[_] 75 days after filing pursuant
to Rule 485(a)(2), or
[_] on ___________pursuant
to Rule 485(a)(2)
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
----------------
This Post-Effective Amendment No. 55 (the "Amendment") to the Registration
Statement of Stagecoach Funds, Inc. (the "Company") is being filed to register
the definitive forms of prospectus and statement of additional information for
the Asset Allocation, Index Allocation and U.S. Government Allocation Funds, and
to make certain other non-material changes to the prospectus and statement of
additional information for these funds.
This Post-Effective Amendment does not affect the Registration Statement
for any of the Company's other funds.
<PAGE>
June 30, 1999
Stagecoach
Allocation Funds
Prospectus
Asset Allocation Fund Please read this prospectus and keep it for
future reference. It is designed to provide you
Index Allocation Fund with important information and to help you decide
if a Fund's goals match your own.
U. S. Government
Allocation Fund Federal law requires us to update this prospectus
annually. Federal law does not allow us to
satisfy prospectus delivery requirements by
Class A, Class B and sending one prospectus for all accounts and
Class C people within a household. Therefore, if you own
the same fund in more than one account or if
several people in your household own the same
fund, you will receive multiple prospectuses.
These securities have not been approved or
disapproved by the Securities and Exchange
Commission ("SEC"), or any other regulatory
authority, nor has the SEC passed upon the
accuracy or adequacy of this prospectus.
Representation to the offense.
Fund shares are NOT deposits of Wells Fargo Bank,
N.A. ("Wells Fargo Bank") or any of its
affiliates. Fund shares are NOT insured or
guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation ("FDIC") or any
other governmental agency. An investment in a
Fund involves certain risks, including possible
loss of principal.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Overview Objectives and Principal Strategies 4
This section contains important summary Summary of Important Risks 6
information about the Funds. Performance History 8
Summary of Expenses 12
- -----------------------------------------------------------------------------------------------
The Funds Asset Allocation Fund 16
This section contains important Index Allocation Fund 20
information about the individual U.S. Government Allocation Fund 24
Funds. General Investment Risks 28
Organization and Management
of the Funds 33
- -----------------------------------------------------------------------------------------------
Your Investment A Choice of Share Classes 36
Turn to this section for information Reduced Sales Charges 39
on how to open and maintain your account, Exchanges 43
including how to buy, sell and exchange Fund Your Account 44
shares. How to Buy Shares 46
Selling Shares 48
Additional Services and
Other Information 54
Important Information
for Shareholders 56
- -----------------------------------------------------------------------------------------------
Glossary 57
</TABLE>
<PAGE>
Stagecoach Allocation Funds Overview
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FUND OBJECTIVE PRINCIPAL STRATEGY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Seeks long-term total return, We do not select individual securities for investment, rather, we buy
Asset Allocation consistent with reasonable risk. substantially all of the securities of various indexes to replicate the
Fund total return of the index. We use an asset allocation model to allocate and
reallocate assets among common stocks (S&P 500 Index), U.S. Treasury bonds
(Lehman Brothers 20+ Bond Index) and money market instruments, operating
from a target allocation of 60% stocks and 40% bonds. We invest in asset
classes that we believe are undervalued in order to achieve better long-
term, risk-adjusted returns.
- --------------------------------------------------------------------------------------------------------------------------------
Seeks long-term total return, We do not select individual securities for investment, rather, we buy
Index Allocation consistent with reasonable risk. substantially all of the securities of various indexes to replicate the
Fund total return of the index. We use an asset allocation model to allocate and
reallocate assets among common stocks (S&P 500 Index), U.S. Treasury bonds
Lehman Brothers 20+ Bond Index) and money market instruments, operating
from a target allocation of 100% stocks. We invest in asset classes that we
believe are undervalued in order to achieve better long-term, risk-adjusted
returns.
- ------------------------------------------------------------------------------------------------------------------------------------
Seeks long-term total return, We do not select individual securities for investment, rather, we buy
U.S. Government consistent with reasonable substantially all of the securities of various indexes to replicate the
Allocation Fund risk. total return of the index. We use an asset allocation model to allocate and
reallocate assets among long-term U.S. Treasury bonds, intermediate-term
U.S. Treasury notes, and short-term money market instruments. We invest at
least 65% of the Fund's assets in U.S. Government securities. We invest in
asset classes that we believe are undervalued in order to achieve better
long-term, risk-adjusted returns.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4 Stagecoach Allocation Funds Prospectus
<PAGE>
Summary of Important Risks
- --------------------------------------------------------------------------------
This section summarizes important risks that are common to all of the Funds
described in this Prospectus, and important risks that relate specifically to
particular Funds. Both are important to your investment choice. Additional
information about these and other risks is included in the individual Fund
Descriptions later in this Prospectus and under General Investment Risks
beginning on page 28. An investment in a Fund is not a deposit of Wells Fargo
Bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- --------------------------------------------------------------------------------
COMMON RISKS FOR THE FUNDS
- --------------------------------------------------------------------------------
Equity Securities
The Asset Allocation and Index Allocation Funds invest in equity securities,
which are subject to equity market risk. This is the risk that stock prices will
fluctuate and can decline and reduce the value of a Fund's portfolio. Certain
types of stock and certain individual stocks selected for a Fund's portfolio may
underperform or decline in value more than the overall market. As of the date of
this Prospectus, the equity markets, as measured by the S&P 500 Index and other
commonly used indexes, are trading at or close to record levels. There can be no
guarantee that these levels will continue.
Fixed Income Securities
The Funds may invest in debt instruments, such as notes and bonds, which are
subject to credit risk and interest rate risk. Credit risk is the possibility
that an issuer of an instrument will be unable to make interest payments or
repay principal. Changes in the financial strength of an issuer or changes in
the credit rating of a security may affect its value. Interest rate risk is the
risk that interest rates may increase, which will reduce the resale value of
instruments in a Fund's portfolio. Debt instruments with longer maturities are
generally more sensitive to interest rate changes than those with shorter
maturities. Changes in market interest rates do not affect the rate payable on
debt instruments held in a Fund, unless the instrument has adjustable or
variable rate features, which can reduce interest rate risk. Changes in market
interest rates may also extend or shorten the duration of certain types of
instruments, such as asset-backed securities, thereby affecting their value and
the return on your investment.
- --------------------------------------------------------------------------------
5 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
FUND SPECIFIC RISKS
- --------------------------------------------------------------------------------
The Funds use investment models that seek undervalued asset
classes. There is no guarantee that the model will make
Asset Allocation accurate determinations or that an asset class we believe
Models is undervalued will perform as expected. We may incur
higher than average portfolio turnover resulting from
allocation shifts recommended by the model. Portfolio
turnover increases transaction costs and may trigger
capital gains.
- --------------------------------------------------------------------------------
Stagecoach Allocation Funds Prospectus 6
<PAGE>
Performance History
The information on the following pages shows you how each Fund has performed and
illustrates the variability of a Fund's returns over time. Each Fund's average
annual returns for one-, five- and ten-year periods are compared to the
performance of an appropriate broad-based index (or indexes).
Please remember that past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
ASSET ALLOCATION FUND CLASS A SHARES
CALENDAR YEAR RETURNS/1/
[BAR CHART APPEARS HERE]
Best Qtr.: Worst Qtr.:
Q4 '98 Q3'98
16.09% -5.55%
1. Returns do not reflect sales charges. If they did, returns would be lower.
The Asset Allocation Fund's year-to-date performance for the quarter ended
March 31, 1999 was 2.60%.
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (%)
- -----------------------------------------------------------------
(for the period ended 12/31/98)
- -----------------------------------------------------------------
Asset Allocation Fund 1 year 5 year 10 year
Class A (Incept. 11/13/86)/1/ 19.95 15.45 14.01
Class B (Incept. 1/1/95)/1/ 19.67 N/A N/A
Class C (Incept. 4/1/98)/2/ N/A N/A N/A
S&P 500 Index/2/ 28.60 24.05 19.19
LB Gov't/Corp. Bond Index/4/ 9.47 7.30 9.33
S&P 500, LB Gov/Corp./5/ 20.94 17.40 15.38
1. Returns reflect applicable sales charges.
2. Class C shares of this Fund have been in operation for less than one
calendar year and therefore performance information is not reported for these
shares.
3. S&P 500 is a registered trademark of Standard & Poor's.
4. Lehman Brothers Government/Corporate Bond Index.
5. Composite Benchmark representing 60% of the S&P 500 Index and 40% of the LB
Gov/Corp. Bond Index for the relevant period.
7 Stagecoach Allocation Funds Prospectus
<PAGE>
Performance History
The information on the following pages shows you how each Fund has performed and
illustrates the variability of a Fund's returns over time. Each Fund's average
annual returns for one-, five- and ten-year periods are compared to the
performance of an appropriate broad-based index (or indexes).
Please remember that past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
ASSET ALLOCATION FUND CLASS A SHARES
CALENDAR YEAR RETURNS/1/
[BAR CHART APPEARS HERE]
Best Qtr.: Worst Qtr.:
Q4 '98 Q3'98
16.09% -5.55%
1. Returns do not reflect sales charges. If they did, returns would be lower.
The Asset Allocation Fund's year-to-date performance for the quarter ended March
31, 1999 was 2.60%.
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (%)
- -----------------------------------------------------------------
(for the period ended 12/31/98)
- -----------------------------------------------------------------
Asset Allocation Fund 1 year 5 year 10 year
Class A (Incept. 11/13/86)/1/ 19.95 15.45 14.01
Class B (Incept. 1/1/95)/1/ 19.67 N/A N/A
Class C (Incept. 4/1/98)/2/ N/A N/A N/A
S&P 500 Index/2/ 28.60 24.05 19.19
LB Gov't/Corp. Bond Index/4/ 9.47 7.30 9.33
S&P 500, LB Gov/Corp./5/ 20.94 17.40 15.38
1. Returns reflect applicable sales charges.
2. Class C shares of this Fund have been in operation for less than one
calendar year and therefore performance information is not reported for these
shares.
3. S&P 500 is a registered trademark of Standard & Poor's.
4. Lehman Brothers Government/Corporate Bond Index.
5. Composite Benchmark representing 60% of the S&P 500 Index and 40% of the LB
Gov/Corp. Bond Index for the relevant period.
8 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
INDEX ALLOCATION FUND CLASS A SHARES
CALENDAR YEAR RETURNS/1/
[GRAPH APPEARS HERE]
Best Qtr.: Worst Qtr.:
Q4 '98 Q3 '98
20.85% -10.12%
1. Returns do not reflect sales charges. If they did, returns would be lower.
The Index Allocation fund's year-to-date performance for the quarter ended
March 31, 1999 was 4.63%.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Average Annual Total Return(%)
- -----------------------------------------------------------------------
(for the period ended 12/31/98)
- -----------------------------------------------------------------------
Index Allocation Fund 1 year 5 year 10 year
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Incept. 4/7/88)1 20.87 18.83 15.10
- -----------------------------------------------------------------------
Class B (Incept. 12/15/97)1 20.57 N/A N/A
- -----------------------------------------------------------------------
Class C (Incept. 7/1/93)1 24.62 19.06 N/A
- -----------------------------------------------------------------------
S&P 500 Index2 28.60 24.05 24.79
- -----------------------------------------------------------------------
</TABLE>
1. Returns reflect applicable sales charges.
2. S&P 500 is a registered trademark of Standard & Poor's.
Stagecoach Allocation Funds Prospectus 9
<PAGE>
Performance History
- --------------------------------------------------------------------------------
U.S. GOVERNMENT ALLOCATION FUND CLASS A SHARES
CALENDAR YEAR RETURNS/1/
[GRAPHS APPEARS HERE]
Best Qtr.: Worst Qtr.:
Q2 '98 Q1 '94
8.00% -4.86%
1. Returns do not reflect sales charges. If they did, returns would be lower.
The U.S. Government Allocation Fund's year-to-date performance for the
quarter ended March 31, 1999 was -0.31%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (%)
- -----------------------------------------------------------------------
(for the period ended 12/31/98)
- -----------------------------------------------------------------------
Asset Allocation Fund 1 year 5 year 10 year
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Incept. 3/31/87)1 0.88 3.60 7.58
- -----------------------------------------------------------------------
Class B (Incept. 1/1/95)1 -0.01 N/A N/A
- -----------------------------------------------------------------------
LB Int. Gov't Bond Index2 8.49 6.45 8.34
- -----------------------------------------------------------------------
</TABLE>
1. Returns reflect applicable sales charges.
2. Lehman Brothers Intermediate Government Bond Index.>>
10 Stagecoach Allocation Funds Prospectus
<PAGE>
This page intentionally left blank
- --------------------------------------------------------------------------------
<PAGE>
Summary of Expenses
- --------------------------------------------------------------------------------
These tables describe the fees and expenses that you may pay if you buy and hold
shares of a Fund. These tables do not reflect charges that may be imposed in
connection with an account through which you hold Fund shares (managed account
fees, for example). Amounts are expressed as a percentage of the initial
purchase amount.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shareholder Fees
- -----------------------------------------------------------------------------------------------------------------------
All
Funds
------------------------------------------------------
Class A/1/ Class B Class C
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 5.75% None None
- -----------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load)
(as a percentage of the lower of the NAV at purchase
or the NAV at redemtion) None 5.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual Fund Operating Expenses (Expenses That Are Deducted From Fund Assets
- -----------------------------------------------------------------------------------------------------------------------
Asset Allocation Fund Index Allocation Fund U.S. Government
Allocation Fund
------------------------------------------------------------------------------------------
Class A Class B Class C Class A Class B Class C Class A Class B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fee .50% .50% .50% .70% .70% .70% .50% .50%
- -----------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) Fee .05% .70% .75% .25% .75% .75% .05% .70%
- -----------------------------------------------------------------------------------------------------------------------
Other Expenses .44% .44% .60% .37% .81% .61% .67% .75%
- -----------------------------------------------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses/2/ 0.99% 1.64% 1.85% 1.32% 2.26% 2.06% 1.22% 1.95%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Prior to July 17, 1999, the maximum sales charge imposed on purchases was
4.50%. The maximum sales charge on shares of the U.S. Government Allocation
Fund remains 4.50%.
/2/ Expense information in the table has been restated to reflect current fees.
The actual expenses incurred by the Funds will be lower than the contract
amounts shown above in certain instances as a result of voluntary fee
waivers. The Funds' actual expenses after waivers are currently as follows
for the share classes indicated: Asset Allocation Fund-Class C: 1.64%;
Index Allocation Fund-Class B: 2.06%; U.S. Government Allocation Fund-Class
A: 1.19%, Class B: 1.84%. Fee waivers are voluntary and may be discontinued
or modified at any time.
12 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Example of Expenses-These examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume a fixed rate of return and that Fund operating expenses remain
the same. Your actual costs may be higher or lower than those shown.>>
<TABLE>
<CAPTION>
You would pay the following
expenses on a $10,000 invest- U.S.
ment assuming a 5% annual Asset Allocation Fund Index Allocation Fund Government
return and that you redeem Allocation
your shares at the end of each Fund
period:
- ---------------------------------------------------------------------------------------------------------------
Class A/1/ Class B Class C Class A/1/ Class B Class C Class A Class B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
1 year $ 670 $ 667 $ 288 $ 702 $ 729 $ 309 $ 569 $ 698
- ---------------------------------------------------------------------------------------------------------------
3 years $ 872 $ 817 $ 582 $ 969 $1006 $ 646 $ 820 $ 912
- ---------------------------------------------------------------------------------------------------------------
5 years $1091 $1092 $1001 $1257 $1410 $1108 $1090 $1252
- ---------------------------------------------------------------------------------------------------------------
10 years $1718 $1689 $2169 $2074 $2247 $2390 $1861 $1997
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
You would pay the following
expenses on a $10,000 U.S.
investment assuming a 5% Asset Allocation Fund Index Allocation Fund Government
annual return and that you do Allocation
not redeem your shares at the Fund
end of the periods shown:
- ---------------------------------------------------------------------------------------------------------------
Class A/1/ Class B Class C Class A/1/ Class B Class C Class A Class B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 670 $ 167 $ 188 $ 702 $ 229 $ 209 $ 569 $ 198
- ---------------------------------------------------------------------------------------------------------------
3 years $ 872 $ 517 $ 582 $ 969 $ 706 $ 646 $ 820 $ 612
- ---------------------------------------------------------------------------------------------------------------
5 years $1091 $ 892 $1001 $1257 $1206 $1108 $1090 $1052
- ---------------------------------------------------------------------------------------------------------------
10 years $1718 $1689 $2169 $2074 $2247 $2390 $1861 $1997
</TABLE>
/1/ Expenses are calculated using a maximum sales charge (load) of 5.75%.
Stagecoach Allocation Funds Prospectus 13
<PAGE>
- --------------------------------------------------------------------------------
The summary information on the previous pages is designed to provide you with an
overview of each Fund. The sections that follow provide more detailed
information about the investments and management of each Fund. Words appearing
in italicized print and highlighted in color are defined in the glossary.
Important information you should look for:
Investment Objective and Investment Policies
What is the Fund trying to achieve? How do we intend to invest your money? What
makes a Fund different from the other Funds offered in this prospectus?
Permitted Investments
A summary of the Fund's key permitted investments and practices.
Important Risk Factors
What are key risk factors for the Fund? This will include the factors described
in "General Investment Risks" together with any special risk factors for the
Fund.
Financial Highlights
Provides important financial information about each class of shares of the
Fund.
14 Stagecoach Allocation Funds Prospectus>>
<PAGE>
This page intentionally left blank
- --------------------------------------------------------------------------------
<PAGE>
Asset Allocation Fund
- --------------------------------------------------------------------------------
Investment Objective
The Asset Allocation Fund seeks long-term total return, consistent with
reasonable risk.
Investment Policies
We allocate and reallocate assets among common stocks, U.S. Treasury Bonds and
money market instruments. This strategy is based on the premise that asset
classes are at times undervalued or overvalued in comparison to one another and
that investing in undervalued asset classes offers better long-term, risk-
adjusted returns.
Permitted Investments
The asset classes we invest in are:
. Stock Investments-We invest in common stocks representative of the S&P 500
Index. We do not individually select common stocks on the basis of
traditional investment analysis. Instead, stock investments are made
according to a weighted formula intended to match the total return of the
S&P 500 Index as closely as possible;
. Bond Investments-We invest in U.S. Treasury Bonds representative of the
Lehman Brothers 20+ Bond Index. Bonds in this Index have remaining
maturities of twenty years or more; and
. Money Market Investments-We invest this portion of obligations of foreign
and domestic banks, short-term corporate debt instruments and repurchase
agreements.
In addition, under normal market conditions, we may invest:
. In call and put options on stock indexes, stock index futures, options on
stock index futures, and interest rate futures contracts as a substitute
for a comparable market position in stocks or bonds;
. In interest rate and index swaps; and
. Up to 25% of total assets in foreign obligations qualifying as money market
investments.
We manage the allocation of investments in the Fund's portfolio assuming a
"normal" allocation of 60% stocks and 40% bonds. This is not a "target"
allocation but rather a measure of the level of risk tolerance for the Fund.
16 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
We are not required to keep a minimum investment in any of the three asset
classes described above, nor are we prohibited from investing substantially all
of our assets in a single class. The allocation may shift at any time. We may
temporarily hold assets in cash or in money market instruments, including
U.S. Government obligations, repurchase agreements and other short-term
investments, to maintain liquidity or when we believe it is in the best
interests of shareholders to do so. During such periods, the Fund may not
achieve its objective of long-term total return. The Fund is a diversified
portfolio.
Important Risk Factors
Foreign obligations may entail additional risks, such as currency, political,
regulatory and diplomatic risks, which are described in more detail in the
General Investment Risks section below. The value of investments in options on
stock indexes and stock index futures is affected by price movements for the
stocks in a particular index, rather than price movements for an individual
security.
You should consider the Common Risks for the Funds on page 6, the General
Investment Risks beginning on page 28 and the specific risks listed here. They
are all important to your investment choice.
Portfolio Management
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
Stagecoach Allocation Funds Prospectus 17
<PAGE>
Asset Allocation Fund Financial Highlights
This table is intended to help you understand the Fund's financial performance
for the past 5 years (or since inception, if shorter). KPMG LLP audited this
information which along with their report and the Fund's financial statements,
is available upon request in the Fund's annual report.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
CLASS A SHARES - COMMENCED
ON NOVEMBER 13, 1986
---------------------------------------------------------------------
Feb. 28, March 31, March 31, Sept. 30, Dec. 31, Dec. 31,
For the period ended: 1999/1/ 1998 1997/2/ 1996/3/ 1995 1994/1/
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.99 $ 20.30 $ 21.24 $ 20.74 $ 16.73 $ 18.80
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.38 0.69 0.41 0.57 0.74 0.77
Net realized and unrealized gain (loss)
on investments 2.92 6.37 0.65 0.50 4.07 (1.31)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.30 7.06 1.06 1.07 4.81 (0.54)
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.33) (0.69) (0.41) (0.57) (0.74) (0.77)
Distributions from net realized gain (2.31) (1.68) (1.59) (0.00) (0.06) (0.76)
- ----------------------------------------------------------------------------------------------------------------------------
Total from distributions (2.64) (2.37) (2.00) (0.57) (0.80) (1.53)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.65 $ 24.99 $ 20.30 $ 21.24 $ 20.74 $ 16.73
- ----------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/4/ 13.69% 36.08% 4.94% 5.14% 29.18% (2.82)
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $1,362,966 $1,305,848 $1,041,622 $1,057,346 $1,077,935 $896,943
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 0.92% 0.95%/4/ 0.92%/4/ 0.90%/4/ 0.84% 0.84%
Ratio of net investment income to
average net assets 1.65% 2.99%/4/ 3.91%/4/ 3.53%/4/ 3.81% 4.30%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 31% 51%/4/ 5%/4/ 1%/5/ 15% 49%
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund changed its fiscal year-end from March 31 to February 28.
/2/ The Fund changed its fiscal year-end from September 30 to March 31.
/3/ The Fund changed its fiscal year-end from December 31 to September 30.
18 Stagecoach Allocation Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES - COMMENCED CLASS C SHARES
ON JANUARY 1, 1995 COMMENCED ON
APRIL 1, 1998
--------------------------------------------------------------------------
Feb. 28, March 31, March 31, Sept. 31, Dec. 31, Feb. 28,
1999/1/ 1998 1997/1/ 1997/1/ 1995 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.16 $ 12.29 $ 12.84 $ 12.50 $ 10.00 $ 15.16
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13 0.29 0.19 0.28 0.22 0.08
Net realized and unrealized gain (loss)
on investments 1.77 3.89 0.41 0.34 2.53 1.82
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment operations: 1.90 4.18 0.60 0.67 2.75 1.90
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.11) (0.29) (0.19) (0.28) (0.22) (0.07)
Distributions from net realized gain (1.40) (1.02) (0.96) (0.00) (0.03) (1.40)
- -----------------------------------------------------------------------------------------------------------------------------
Total from distributions (1.51) (1.31) (1.15) (0.28) (0.25) (1.47)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.55 $ 15.16 $ 12.29 $ 12.84 $ 12.50 $ 15.59
- -----------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/4/ 12.98% 35.16% 4.62% 4.96% 27.72% 12.97%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000's) $402,991 $267,060 $89,252 $63,443 $26,271 $ 10,076
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.62% 1.60%/4/ 1.53%/4/ 1.14%/4/ 1.53% 1.64%
Ratio of net investment income to
average net assets 0.91% 2.15%/4/ 3.30%/4/ 3.37%/4/ 2.71% 0.69%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 31% 51%/4/ 5%/4/ 1%/5/ 15% 31%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.63% N/A 1.58%/4/ 1.56%/4/ 1.76% 1.85%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets prior to waived fees and reimbursed
expenses 0.90 N/A 3.25%/4/ 2.95%/4/ 2.48% 0.48%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/4/ Ratio includes income and expenses charged to the Master Portfolio prior to
December 15, 1997.
/5/ Represents portfolio activity for the Fund's stand-alone period only. The
portfolio turnover for the period from April 28, 1996 to September 30, 1996
was 28%.
/4/ Total returns do not include any sales charges. Total returns for periods
less than one year are not annualized.
Stagecoach Allocation Funds Prospectus 19
<PAGE>
Index Allocation Fund
_______________________________________________________________________________
Investment Objective
The Index Allocation Fund seeks to earn over the long-term a high level of total
return, that is, income and capital appreciation combined, consistent with the
assumption of reasonable risk, by pursuing an "asset allocation" strategy
whereby its investments are allocated, based on changes in market conditions,
among three asset classes--common stocks in the S&P 500 Index, U.S. Treasury
Bonds and money market instruments.
Investment Policies
We allocate and reallocate assets among common stocks, U.S. Treasury bonds and
money market instruments. This strategy is based on the premise that, from time
to time, certain asset classes are more attractive long-term investments than
others and that time shifts based on the relative over or under-valuation of
these classes may produce superior investment returns.
Permitted Investments
We invest in the following asset classes:
. Stock Investments--We invest in common stocks representative of the S&P 500
Index. We do not individually select common stock on the basis of
traditional investment analysis. Instead stock investments are made
according to a weighted formula intend to match the S&P 500 Index as closely
as possible.
. Bond Investments--We invest in U.S. Treasury bonds representative of the
Lehman Brothers 20+ Bond Index. Bonds on this Index will have maturities of
20 years or more; and
. Money Market Investments--We invest this portion of the Fund in high-quality
money market instruments, including U.S. Government obligations, obligations
of foreign and domestic banks, short-term corporate debt instruments and
repurchase agreements.
In addition, under normal market conditions, we invest:
. at least 65% of assets in stocks representative of the S&P 500 Index, the
Lehman Brothers 20+ Bond Index or a combination of both;
. in call and put options on stock indexes, stock index futures, options on
stock index futures, interest rate and Interest Rate Futures contracts as a
substitute for a comparable market position in stocks;
. in interest rate and index swaps; and
. up to 25% of total assets in obligations of foreign banks qualifying as
money market investments.
20 Stagecoach Allocation Funds Prospectus
<PAGE>
________________________________________________________________________________
We manage the allocation of investments in the Fund's portfolio based on the
assumption that the Fund's "normal" allocation is 100% stocks and no bonds. This
is not a "target" allocation but rather a measure of the level of risk tolerance
for the Fund.
We are not required to keep a minimum investment in any of the three asset
classes, nor are we prohibited from investing substantially all of our assets in
a single class. The asset allocation may shift at any time. In addition, we may
temporarily hold assets in cash or in money market instruments, including U.S.
Government obligations, repurchase agreements and other short-term investments,
to maintain liquidity or when we believe it is the best interest of shareholders
to do so. During such periods, the Fund may not achieve its objective of long-
term total return.
Important Risk Factors
You should consider the Common Risks on page 6, the General Investment Risks
beginning on page 28 and the specific risks listed above. They are equally
important to your investment choice.
We may incur a higher than average portfolio turnover ratio due to allocation
shifts recommended by the model. Foreign obligations may entail additional
risks. Investments in options on stock indexes depend on movements in the market
in general, or price level movements for a particular index, rather than price
movements for an individual issue.
Portfolio Management
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
Stagecoach Allocation Funds Prospectus 21
<PAGE>
Index Allocation Fund Financial Highlights
This table is intended to help you understand the Fund's financial
performance for the past 5 years (or since inception, if shorter). KPMG LLP
audited this information which, along with their report and the Fund's
financial statements, is available upon request in the Fund's annual
report.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
CLASS A SHARES - COMMENCED
ON APRIL 7, 1988
----------------------------------------------------------------
Feb. 28, March 31, Dec. 31, Dec. 31, Dec. 31, Dec 31,
1999/1/ 1998/2/ 1997 1996 1995 1994
For the period ended:
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 17.55 $ 15.51 $ 13.99 $ 13.76 $ 10.67 $ 11.90
- ------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income (loss) 0.03 0.01 0.28 0.29 0.28 0.31
Net realized and
unrealized gain (loss)
on investments 2.14 2.04 3.23 2.02 3.42 (0.39)
- ------------------------------------------------------------------------------------------------------------------
Total from investment
operations 2.17 2.05 3.51 2.31 3.70 (0.08)
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.03) (0.01) (0.28) (0.29) (0.28) (0.31)
Distributions from
net realized gain (0.65) 0.00 (1.71) (1.79) (0.33) (0.84)
- ------------------------------------------------------------------------------------------------------------------
Total from distributions (0.68) (0.01) (1.99) (2.08) (0.61) (1.15)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 19.04 17.55 $ 15.51 $ 13.99 $ 13.76 $ 10.67
- ------------------------------------------------------------------------------------------------------------------
Total return (not
annualized)/3/ 12.60% 13.23% 25.18% 17.04% 34.71% (0.68)%
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of
period (000's) $92,655 $92,733 $80,512 $60,353 $52,007 $40,308
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets (annualized):
Ratio of expenses
to average net
assets 1.29% 1.31% 1.26% 1.31% 1.30% 1.30%
Ratio of net
investment income to
average net assets 0.19% 0.30% 1.82% 2.06% 2.07% 2.41%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover 12% 0% 80% 67% 47% 50%
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses N/A 1.32% 1.29% 1.44% 1.35% 1.38%
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets prior to
waived fees and
reimbursed expenses N/A 0.29% 1.79% 1.93% 2.02% 2.33%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund changed its fiscal year-end from March 31 to February 28.
/2/ The Fund changed its fiscal year-end from December 31 to March 31.
/3/ Total returns do not include any sales charges. Total returns for periods
less than one year are not annualized.
21
<PAGE>
<TABLE>
<CAPTION>
CLASS C SHARES - COMMENCED
ON JULY 1, 1993
---------------------------------------------------------
Feb.28, March.31 Dec.31, Dec.31, Dec.31, Dec.31,
1999/1/ 1998/1/ 1997 1996 1995 1994
For the period ended:
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.82 $ 19.32 $ 17.42 $ 17.10 $ 13.26 $14.75
- ---------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income (loss) (0.10) (0.02) 0.20 0.22 0.20 0.25
Net realized and
unrealized gain (loss)
on investments 2.64 2.52 4.00 2.54 4.54 (0.45)
- ---------------------------------------------------------------------------------------------------------
Total from investment
operations 2.54 2.50 4.20 2.76 4.44 (0.20)
- ---------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.00) 0.00 (0.20) (0.22) (0.20) (0.25)
Distributions from
net realized gain (0.80) 0.00 (2.10) (2.22) (0.40) (1.04)
- ---------------------------------------------------------------------------------------------------------
Total from distributions (0.80) 0.00 (2.30) (2.44) (0.60) (1.29)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 23.56 $ 21.82 $19.32 $17.42 $17.10 $13.26
- ---------------------------------------------------------------------------------------------------------
Total Return (not annualized) 11.88% 13.00% 24.07% 16.37% 33.72% (1.38)%
- ---------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of
period (000's) $67,364 $56,164 $46,084 $24,655 $16,075 $ 9,798
- ---------------------------------------------------------------------------------------------------------
Ratios to average net
assets (annualized):
Ratio of expenses
to average net
assets 2.05% 2.05% 2.02% 2.05% 2.05% 2.01%
Ratio of net
investment income
to average net assets (0.56)% (0.44) 1.00% 1.35% 1.30% 1.75%
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover 12% 0% 80% 12% 47% 50%
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses 2.06% 2.09 2.05% 2.20% 2.17% 2.20%
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets prior to
waived fees and
reimbursed
expenses (0.57)% (0.48) 0.97% 1.20% 1.18% 1.56%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
U.S. Government Allocation Fund
________________________________________________________________________________
Investment Objective
The U.S. Government Allocation Fund seeks long-term total return, consistent
with reasonable risk.
Investment Policies
We allocate and reallocate assets among long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
This strategy is based on the premise that asset classes are at times
undervalued or overvalued in comparison to one another and that investing in
undervalued asset classes offers better long-term, risk-adjusted returns.
Permitted Investments
The assets classes we may invest in are composed as follows:
. Long Term Investments-We invest in U.S. Treasury bonds representative of
the Lehman Brothers 20+ Bond Index. Bonds on this Index have maturities of
twenty years or more.
. Intermediate-Term Investments-We invest in U.S. Treasury securities
representative of the Lehman Brothers U.S. Government Intermediate Bond
Index. Bonds on this Index have maturities of one to twenty years.
. Short-Term Investments-We invest in high-quality money market instruments,
including U.S. Government obligations, obligations of foreign of foreign
and domestic banks, short-term corporate debt instruments and repurchase
agreements.
Under normal market conditions, we invest:
. at least 65% of total assets in U.S. Government obligations; and
. up to 25% of total assets in foreign obligations qualifying as money market
investments.
As long as we keep 65% of assets in U.S. Government obligations, we are not
required to keep a minimum investment in any of the three asset classes, nor are
we prohibited from investing substantially all of our assets in a single asset
class. The allocation may shift any time.
Important Risk Factors
We may incur a higher than average portfolio turnover ratio due to allocation
shifts recommended by the model. Foreign obligations may entail additional
risks.
23
<PAGE>
_______________________________________________________________________________
You should consider the Common Risks on page 6, the General Investment Risks
beginning on page 28, and the specific risks listed above. They are all
important to your investment choice.
Portfolio Management
The Fund is managed by a team of advisors who, using the Allocation model,
jointly make investment decisions for the Funds.
24
<PAGE>
U.S. Government Allocation Fund Financial Highlights
This table is intended to help you understand the Fund's financial performance
for the past 5 years (or since inception, if shorter). KPMG LLP audited this
information which, along with their report and the Fund's financial statements,
is available upon request in the Fund's annual report.
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
CLASS A SHARES - COMMENCED
ON MARCH 31, 1987
-------------------------------------------------------------
Feb. 28, March 31, March 31, Sept. 30, Dec. 31, Dec. 31,
For the period ended: 1999/1/ 1998 1997/2/ 1996/3/ 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.87 $ 14.32 $ 14.48 $ 14.98 $ 13.76 $ 15.71
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.57 0.77 0.42 0.59 0.79 0.87
Net realized and unrealized gain (loss)
on investments (0.01) 0.55 (0.16) (0.50) 1.22 (1.95)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.56 1.32 0.26 0.09 2.01 (1.08)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.57) (0.77) (0.42) (0.59) (0.79) (0.87)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------
Total from distributions (0.57) (0.77) (0.42) (0.59) (0.79) (0.87)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.86 $ 14.87 $ 14.32 $ 14.48 $ 14.98 $ 13.76
- -------------------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ 3.78% 9.36% 1.75% 0.69% 14.91% (6.99)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $74,728 $82,958 $86,930 $98,741 $135,577 $140,066
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.17% 1.16%/4/ 1.00%/4/ 1.12%/4/ 1.04% 1.01%
Ratio of net investment income to
average net assets 4.15% 5.21%/4/ 5.70%/4/ 5.45%/4/ 5.41% 5.94%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 152% 62%/4/ 113%/4/ 31%/5/ 292% 112%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.22% 1.26%/4/ 1.31%/4/ 1.20%/4/ 1.07% 1.08%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets prior to waived fees and reimbursed 4.10% 5.11%/4/ 5.39%/4/ 5.37%/4/ 5.38% 5.87%
expenses
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Fund changed its fiscal year-end from March 31 to February 28, 1999.
/2/ The Fund changed its fiscal year-end from September 30 to March 31.
/3/ The Fund changed its fiscal year-end from December 31 to September 30.
26 Stagecoach Allocation Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES-COMMENCED
ON JANUARY 1, 1995
-------------------------------------------------
Feb. 28, Mar. 31, Mar. 31, Sept. 30, Dec. 31,
For the period ended: 1999/1/ 1998 1997/2/ 1996/3/ 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.82 $ 10.42 $ 10.54 $ 10.91 $10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.34 0.49 0.27 0.36 0.49
Net realized and unrealized gain (loss)
on investments (0.01) 0.40 (0.12) (0.37) 0.91
- --------------------------------------------------------------------------------------------------------------
Total from investment operations 0.33 0.89 0.15 (0.01) 1.40
- --------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.34) (0.49) (0.27) (0.36) (0.49)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------
Total from distributions (0.34) (0.49) (0.27) (0.36) (0.49)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.81 $ 10.82 $ 10.42 $ 10.54 $10.91
- --------------------------------------------------------------------------------------------------------------
Total return (not annualized)/6/ 3.12% 8.64% 1.42% 0.11% 14.11%
- --------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s) $18,654 $14,144 $ 7,221 $ 6,406 $4,077
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Ratio of expenses to average net assets 1.84% 1.82%/4/ 1.61%/4/ 1.92%/4/ 1.65%
Ratio of net investment income to
average net assets 3.41% 4.40%/4/ 5.12%/4/ 4.60%/4/ 4.31%
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover 152% 62%/4/ 113%/4/ 31%/5/ 292%
- --------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.95% 2.08%/4/ 2.28%/4/ 2.21%/4/ 2.36%
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets prior to waived fees and reimbursed 3.30% 4.14%/4/ 4.45%/4/ 4.31%/4/ 3.60%
expenses
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4 Ratio includes income and expenses charged to the Master Portfolio prior to
December 15, 1997.
5 Represents portfolio activity for the Fund's stand-alone period only. The
portfolio turnover for the period from April 28, 1996 to September 30, 1996
was 87%.
6 Total returns do not include any sales charges. Total returns for periods less
than one year are not annualized.
Stagecoach Allocation Funds Prospectus 27
<PAGE>
General Investment Risks
_______________________________________________________________________________
Understanding the risks involved in mutual fund investing will help you make an
informed decision that takes into account your risk tolerance and preferences.
You should carefully consider the risks common to investing in all mutual funds,
including the Stagecoach Funds. Certain common risks are identified in the
Summary of Important Risks on page 6. Other risks of mutual fund investing
include the following:
. Unlike bank deposits such as CDs or savings accounts, mutual funds are not
insured by the FDIC.
. We cannot guarantee that we will meet our investment objectives.
. We do not guarantee the performance of a Fund, nor can we assure you that
the market value of your investment will not decline. We will not "make
good" any investment loss you may suffer, nor can anyone we contract with to
provide certain services, such as selling agents or investment advisors,
offer or promise to make good any such losses.
. Share prices-and therefore the value of your investment-will increase and
decrease with changes in the value of the underlying securities and other
investments. This is referred to as price volatility.
. Investing in any mutual fund, including those deemed conservative, involves
risk, including the possible loss of any money you invest.
. An investment in a single Fund, by itself, does not constitute a complete
investment plan.
. The Funds may invest a portion of their assets in U.S. Government
obligations. It is important to recognize that the U.S. Government does not
guarantee the market value or current yield of those obligations. Not all
U.S. Government obligations are backed by the full faith and credit of the
U.S. Treasury, and the U.S. Government's guarantee does not extend to the
Funds themselves.
. The Funds may also use certain derivative instruments, such as options or
futures contracts. The term "derivatives" covers a wide number of
investments, but in general it refers to any financial instrument whose
value is derived, at least in part, from the price of another security or a
specified index, asset or rate. Some derivatives may be more sensitive to
interest rate changes or market moves, and some may be susceptible to
changes in yields or values due to their structure or contract terms.
28 Stagecoach Allocation Funds Prospectus
<PAGE>
_______________________________________________________________________________
What follows is a general list of the types of risks (some of which are
described above) that may apply to a given Fund and a table showing some of the
additional investment practices that each Fund may use and the risks associated
with them. Additional information about these practices is available in the
Statement of Additional Information.
Counter-Party Risk - The risk that the other party in a repurchase agreement or
other transaction will not fulfill its contract obligation.
Credit Risk - The risk that the issuer of a debt security will be unable to make
interest payments or repay principal on schedule. If an issuer does default, the
affected security could lose all of its value, or be renegotiated at a lower
interest rate or principal amount. Affected securities might also lose
liquidity. Credit risk also includes the risk that a party in a transaction may
not be able to complete the transaction as agreed.
Currency Risk - The risk that a change in the exchange rate between U.S. dollars
and a foreign currency may reduce the value of an investment made in a security
denominated in that foreign currency.
Diplomatic Risk - The risk that an adverse change in the diplomatic relations
between the United States and another country might reduce the value of
liquidity of investments in either country.
Emerging Market Risk - The risk that the emerging market, as defined in the
glossary, may be more sensitive to certain economic changes. For example,
emerging market countries are often dependent on international trade and are
therefore often vulnerable to recessions in other countries. They may have
obsolete financial systems, have volatile currencies and may be more sensitive
than more mature markets to a variety of economic factors. Emerging market
securities may also be less liquid than securities of more developed countries
and could be difficult to sell, particularly during a market downturn.
Experience Risk - The risk presented by a new or innovative security. The risk
is that insufficient experience exists to forecast how the security's value
might be affected by various economic conditions.
Information Risk - The risk that information about a security is either
unavailable, incomplete or is inaccurate.
Stagecoach Allocation Funds Prospectus 29
<PAGE>
General Investment Risks
_______________________________________________________________________________
Interest Rate Risk - The risk that changes in interest rates can reduce the
value of an existing security. Generally, when interest rates increase, the
value of a debt security decreases. The effect is usually more pronounced for
securities with longer dates to maturity.
Leverage Risk - The risk that an investment practice, such as securities lending
activities or engaging in forward commitment or when-issued securities
transactions, may increase a Fund's exposure to market risk, interest rate risk
or other risks by, in effect, increasing assets available for investment.
Liquidity Risk - The risk that a security cannot be sold, or cannot be sold
without adversely affecting the price.
Market Risk - The risk that the value of a stock, bond or other security will be
reduced by market activity. This is a basic risk associated with all securities.
Political Risk - The risk that political actions, events or instability may be
unfavorable for investments made in a particular nation's or region's industry,
government or markets.
Regulatory Risk - The risk that changes in government regulations will adversely
affect the value of a security. Also the risk that an insufficiently regulated
market might permit inappropriate trading practices.
Year 2000 Risk - The Funds' principal service providers have advised the Funds
that they are working on the necessary changes to their computer systems to
avoid any system failure based on an inability to distinguish the year 2000 from
the year 1900, and that they expect their systems to be adapted in time. There
can, of course, be no assurance of success. In addition, the companies or
entities in which the Funds invest also could be adversely impacted by the Year
2000 issue. The extent of such impact cannot be predicted.
30 Stagecoach Allocation Funds Prospectus
<PAGE>
_______________________________________________________________________________
Investment Practice/Risk
The following table lists some of the additional investment practices of the
Funds, including some not disclosed in the Investment Objective and Investment
Policies sections of the Prospectus. The risks indicated after the description
of the practice are NOT the only potential risks associated with that practice,
but are among the more prominent. Market risk is assumed for each. See the
Investment Objective and Investment Policies for each Fund or the Statement of
Additional Information for more information on these practices.
Investment practices and risk levels are carefully monitored. We attempt to
ensure that the risk exposure for each Fund remains within the parameters of its
objective.
Remember, each Fund is designed to meet different investment needs and
objectives.
In addition to the general risks discussed above, you should carefully consider
and evaluate any special risks that may apply to investing in a particular Fund.
See the "Important Risk Factors" in the summary for each Fund. You should also
see the Statement of Additional Information for additional information about the
investment practices and risks particular to each Fund.
Stagecoach Allocation Funds Prospectus 31
<PAGE>
General Investment Risks
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET INDEX U.S. GOVERNMENT
ALLOCATION ALLOCATION ALLOCATION
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE: RISK:
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Floating and Variable Rate Debt
Instruments with interest rates that are
adjusted either on a schedule or when an Interest Rate and . . .
index or benchmark changes. Credit Risk
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements
A transaction in which the seller of a security Credit and
agrees to buy back a security at an agreed upon Counter-Party Risk . . .
time and price usually with interest.
- --------------------------------------------------------------------------------------------------------------------------------
Other Mutual Funds
The temporary investment in shares of another Market Risk
mutual fund. A pro rata portion of the other
fund's expenses, in addition to the expenses . . .
paid by the Funds, will be borne by Funds
shareholders.
- --------------------------------------------------------------------------------------------------------------------------------
Foreign Securities Information, Political,
Securities in a dollar-denominated debt Regulatory, Liquidity, . . .
of non-U.S. companies or foreign governments. Diplomatic and Currency
Risk
- --------------------------------------------------------------------------------------------------------------------------------
Options
The right or obligation to receive or deliver Credit Information
a security or cash payment depending on the and Liquidity Risk
security's price or the performance of an
index or benchmark.
- --------------------------------------------------------------------------------------------------------------------------------
Stock Index Futures . .
Options on Stock Index Futures . .
Index Swaps . . .
Interest Rate Futures . . .
Interest Rate Futures Options . . .
Interest Rate Swaps . . .
- --------------------------------------------------------------------------------------------------------------------------------
Loans of Portfolio Securities
The practice of loaning securities to brokers, Credit Counter-Party
dealers and financial institutions to increase and Leverage Risk . . .
return on those securities. Loans may be made
in accordance with existing investment policies.
- --------------------------------------------------------------------------------------------------------------------------------
Borrowing Policies
The ability to borrow an equivalent of 20% (10% Leverage Risk
for Index Allocation) of assets from banks for . . .
temporary purposes to meet shareholder
redemptions.
- --------------------------------------------------------------------------------------------------------------------------------
Liquid Securities
A security that cannot be readily sold , or can- Liquidity Risk
not be readily sold without negatively affecting . . .
its fair price. Limited to 15% of assets for
Asset Allocation and U.S. Government Allocation
Funds 10% of assets for index Allocation Fund.
- --------------------------------------------------------------------------------------------------------------------------------
Privately Issued Securities
Securities that are not publicly traded but Liquidity Risk
which may be resold in accordance with Rule . . .
144A of the Securities Act of 1933.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32 Stagecoach Allocation Funds Prospectus
<PAGE>
Organization and Management of the Funds
- --------------------------------------------------------------------------------
A number of different entities provide service to the Funds. This section shows
how the Funds are organized, the entities that perform different services, and
how they are compensated. Further information is available in the Statement of
Additional Information for the Funds.
About Stagecoach
Each Fund is one of over 30 Funds of Stagecoach Funds, an open-end management
investment company. Stagecoach was organized on September 9, 1991, as a Maryland
Corporation.
The Board of Directors of Stagecoach supervises the Fund's activities and
approves the selection of various companies hire to manage the Funds' operation.
The major service providers are described in the diagram below. Except for the
advisers, which require shareholder vote to change, if the Board believes that
it is in the best interests of the shareholders it may make a change in one of
these companies.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Supervises the Funds' activities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR CUSTODIAN
- --------------------------------------------------------------------------------
Wells Fargo Bank, N.A. Barclays Global Investors, N.A.
525 Market St., San Francisco, CA 45 Fremont St., San Francisco, CA
Manages the Funds' Investment activities Provides safekeeping for the
Funds' assets
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISOR
- --------------------------------------------------------------------------------
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TRANSFER AND
DIVIDEND DISBURSING SHAREHOLDER
DISTRIBUTOR ADMINISTRATOR AGENT SERVICING AGENTS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephens Inc. Wells Fargo Bank, N.A. Wells Fargo Bank Various Agents
111 Center St 525 Market St. 525 Market St.
Little Rock, AR San Francisco, CA San Francisco, CA
Markets the Funds Manages the Maintains records of Provide
and distributes Funds' business shares and supervises services to
Fund shares activities the paying of dividends customers
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS AND SELLING AGENTS
- --------------------------------------------------------------------------------
Advise current and prospective shareholders and their Fund Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDERS
- --------------------------------------------------------------------------------
Stagecoach Allocation Funds Prospectus 33
<PAGE>
Organization and Management of the Funds
- ----------------------------------------------------------------------------
In the following sections, the percentages shown are the percentages of the
average daily net assets of each Fund class paid on an annual basis for the
services described.
The Investment Advisor
Wells Fargo Bank provides portfolio management and fundamental security analysis
services as the advisor for each of the Funds. Wells Fargo Bank, founded in
1852, is the oldest bank in the western United States and is one of the largest
banks in the United States. Wells Fargo Bank is a wholly owned subsidiary of
Wells Fargo & Company, a national bank holding company. As of December 31, 1998,
Wells Fargo Bank and its affiliates managed over $121 billion in assets. The
Funds pay Wells Fargo Bank for advisory services as shown as management fee in
the Summary of Expenses section of this prospectus.
The Sub-Advisor
Barclays Global Fund Advisors ("BGFA"), a wholly owned subsidiary of Barclays
Global Investors, N.A. ("BGI") and an indirect subsidiary of Barclays Bank PLC,
is the sub-advisor for the Funds. BGFA was created from the reorganization of
Wells Fargo Nikko Investment Advisors, a former affiliate of Wells Fargo Bank,
and is one of the largest providers of index portfolio management services. As
of December 31, 1998 BGI managed or provided investment advice for assets
aggregating in excess of $619 billion.
The Administrator
Wells Fargo Bank provides the Funds with administration services, including
general supervision of each Fund's operation, coordination of the other services
provided to each Fund, compilation of information for reports to the SEC and the
state securities commissions, preparation of proxy statements and shareholder
reports, and general supervision of data compilation in connection with
preparing periodic reports to the Company's Directors and officers. Wells Fargo
Bank also furnishes office space and certain facilities to conduct each Fund's
business, and compensates the Company's Directors.
34 Stagecoach Allocation Fund Prospectus
<PAGE>
- ----------------------------------------------------------------------------
Shareholder Servicing Plan
We have a shareholder servicing plan for each Fund class. We have agreements
with various shareholder servicing agents to process purchase and redemption
requests, to service shareholder accounts, and to provide other related
services.
For the Class A shares of the Index Allocation Fund, the Fund has a Shareholder
Administrative Servicing Plan. Where fees are paid pursuant to this Plan, no
fees are paid pursuant to any Distribution Plan applicable to these shares.
For shareholder services, each Fund pays as follows:
- ----------------------------------------------------------------------------
Class A Class B Class C
- ----------------------------------------------------------------------------
Asset Allocation Fund 25% 25% 25%
- ----------------------------------------------------------------------------
Index Allocation Fund 25% 25% 25%
- ----------------------------------------------------------------------------
U.S. Government Allocation Fund 25% 25% 25%
- ----------------------------------------------------------------------------
The Transfer Agent
Wells Fargo Bank provides transfer agency and dividend disbursing services to
the Funds. After July 17, 1999, Boston Financial Data Services will provide
these services to the Funds.
Stagecoach Allocation Funds Prospectus 35
<PAGE>
A Choice of Share Classes
- -------------------------------------------------------------------------------
After choosing a Fund, your next most important choice is which share class to
buy. The following classes of shares are available through this Prospectus:
. Class A Shares-with a front-end sales charge, volume reductions and lower
on-going expenses than Class B and Class C shares.
. Class B Shares-with a contingent deferred sales charge ("CDSC") payable upon
redemption that diminishes over time, and higher on-going expenses than
Class A shares.
. Class C Shares-with a 1.00% CDSC on redemptions made within one year of
purchase, and higher on-going expenses than Class A shares.
The choice among share classes is largely a matter of preference. You should
consider, among other things, the different fees and sales loads assessed on
each share class and the length of time you anticipate holding your investment.
If you prefer to pay sales charges up front, wish to avoid higher on-going
expenses, or, more importantly, you think you may qualify for volume discounts
based on the amount of your investment, then Class A shares may be the choice
for you.
You may prefer to see "every dollar working" from the moment you invest. If so,
then consider Class B or Class C shares. Please note that Class B shares convert
to Class A shares after seven years to avoid the higher on-going expenses
assessed against Class B shares.
Class C shares are available for the Asset Allocation and Index Allocation Funds
only. They are similar to Class B shares, with some important differences.
Unlike Class B shares, Class C shares do not convert to Class A shares. The
higher on-going expenses will be assessed as long as you hold the shares. The
choice between Class B and Class C shares may depend on how long you intend to
hold Fund shares before redeeming them.
Please see the expenses listed for each Fund and the following sales charge
schedules before making your decision. You should also review the "Reduced Sales
Charges" section of the Prospectus. You may wish to discuss this choice with
your financial consultant.
Class A Share Sales Charge Schedule
If you choose to buy Class A shares, you will pay the Public Offering Price
(POP) which is the Net Asset Value (NAV) plus the applicable sales charge. Since
sales charges are reduced for Class A share purchases above certain dollar
amounts, known as "breakpoint levels,"the POP is lower for these purchases.
36 Stagecoach Allocation Funds Prospectus
<PAGE>
- -------------------------------------------------------------------------------
For purchases of all Class A shares in this Prospectus prior to July 17, 1999,
the following sales charge schedule applies:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AMOUNT FRONT-END SALES CHARGE AS FRONT-END SALES CHARGE AS DEALER ALLOWANCE AS %
OF PURCHASE % OF PUBLIC OFFERING PRICE % OF NET AMOUNT INVESTED OF PUBLIC OFFERING PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
- -------------------------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.00% 4.17% 3.53%
- -------------------------------------------------------------------------------------------------------------------
$100,000 to $249,999 3.50% 3.63% 3.00%
- -------------------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.50% 2.56% 2.25%
- -------------------------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75%
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 and over/1/ 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1 We will assess Class A shares purchases of $1,000,000 or more a 1.00% CDSC If
they are redeemed within one year from the date of purchase. Charges are based
on the lower of the Nav on the date of purchase or the date of redemption.
After July 17, 1999, the Class A shares of the Asset Allocation and Index
Allocation Funds are subject to the following sales charge schedule:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AMOUNT FRONT-END SALES CHARGE AS FRONT-END SALES CHARGE AS DEALER ALLOWANCE AS %
OF PURCHASE % OF PUBLIC OFFERING PRICE % OF NET AMOUNT INVESTED OF PUBLIC OFFERING PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- -------------------------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% 4.00%
- -------------------------------------------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% 3.00%
- -------------------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% 2.25%
- -------------------------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75%
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 and over/1/ 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ We will assess Class a Shares purchases of $1,000,000 or more a 1.00% CDSC
if they are redeemed within one year from the date of purchase. Changes are
based on the lower of the NAV on the date of purchase or the date of redemption.
Class B Share CDSC Schedule
If you choose Class B shares, you buy them at NAV and agree that if you redeem
your shares within six years of the purchase date, you will pay a CDSC based on
how long you have held your shares. Certain exceptions apply (see
Stagecoach Allocation Funds Prospectus 37
<PAGE>
A Choice of Share Classes
- -------------------------------------------------------------------------------
"Class B and Class C Share CDSC Reductions" and "Waivers for Certain Parties").
The CDSC schedule for purchases prior to July 17, 1999 is as follows:
- --------------------------------------------------------------------------------
REDEMPTION WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS
- --------------------------------------------------------------------------------
CDSC 5.00% 4.00% 3.00% 3.00% 2.00% 1.00%
- --------------------------------------------------------------------------------
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
seven years, the CDSC expires and the Class B shares are converted to Class A
shares to reduce your future on-going expenses.
After July 17, 1999, purchases of Class B shares are subject to the following
sales charge schedule:
- -------------------------------------------------------------------------------
REDEMPTION WITHIN 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR
- -------------------------------------------------------------------------------
CDSC 5.00% 4.00% 3.00% 3.00% 2.00% 1.00%
- --------------------------------------------------------------------------------
The CDSC percentage you pay is based on the lower of the NAV of the shares on
the date of the original purchase, or the NAV of the shares on the date of
redemption.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. After shares are held for
six years, the CDSC expires. After shares are held for seven years, the Class B
shares are converted to Class A shares to reduce your future on-going expenses.
Class C Share CDSC Schedule
If you choose Class C shares, you buy them at NAV and agree that if you redeem
your shares within one year of the purchase date, you will pay a CDSC of 1.00%.
The CDSC percentage you pay is based on the lower of the NAV on the date of the
original purchase, or the NAV on the date of redemption. The distributor pays
sales commissions of up to 1.00% of the purchase price of Class C shares to
selling agents at the time of the sale, and up to 1.00% annually thereafter.
We always process partial redemptions so that the least expensive shares are
redeemed first in order to reduce your sales charges. Class C shares do not
convert to Class A shares, and therefore continue to pay the higher on-going
expenses.
38 Stagecoach Allocation Funds Prospectus
<PAGE>
Reduced Sales Charges
- ------------------------------------------------------------------------------
Generally, we offer more sales charge reductions for Class A shares than for
Class B and Class C shares, particularly if you intend to invest greater
amounts. You should consider whether you are eligible for any of the potential
reductions when you are deciding which share class to buy.
Class A Share Reductions:
. You pay no sales charges on Fund shares you buy with reinvested
distributions.
. You pay a lower sales charge if you are investing an amount over a
breakpoint level. See the "Class A Share Sales Charge Schedule" above.
. By signing a Letter of Intent (LOI), you pay a lower sales charge now in
exchange for promising to invest an amount over a specified breakpoint within
the next 13 months. We will hold in escrow shares equal to approximately 5%
of the amount you intend to buy. If you do not invest the amount specified in
the LOI before the expiration date, we will redeem enough escrowed shares to
pay the difference between the reduced sales load you paid and the sales load
you should have paid. Otherwise, we will release the escrowed shares when you
have invested the agreed amount. After July 17, 1999, purchase of either
Stagecoach (or Norwest Advantage Funds) will count towards satisfying
breakpoint requirements.
. Rights of Accumulation (ROA) allow you to combine the amount you invest with
the total NAV of shares you own in other front-end load Stagecoach (or
Norwest Advantage after July 17, 1999) Funds in order to reach breakpoint
levels for a reduced load. We give you a discount on the entire amount of the
investment that puts you over the breakpoint level.
. If you are reinvesting the proceeds of a Stagecoach Fund redemption for
shares on which you have already paid a front-end sales charge, you have 120
days to reinvest the proceeds of that redemption with no sales charge into a
Fund that charges the same or a lower front-end sales charge.
. You may reinvest into a Stagecoach Fund with no sales charge a required
distribution from a pension, retirement, benefits, or similar plan for which
Wells Fargo Bank acts as trustee provided the distribution occurred within
the 30 days prior to your reinvestment.
If you believe you are eligible for any of these reductions, it is up to you to
ask the selling agent or the shareholder servicing agent for the reduction and
to provide appropriate proof of eligibility.
Stagecoach Allocation Funds Prospectus 39
<PAGE>
Reduced Sales Charges
- --------------------------------------------------------------------------------
You, or your fiduciary or trustee, may also tell us to extend volume discounts,
including the reductions offered for rights of accumulation and letters of
intent, to include purchases made by:
. a family unit, consisting of a husband and wife and children under the age
of twenty-one or single trust estate;
. a trustee or fiduciary purchasing for a single fiduciary relationship; or
. the members of a "qualified group" which consists of a "company" (as
defined in the Investment Company Act of 1940 ("1940 Act")), and related
parties of such a "Company," which has been in existence for at least six
months and which has a primary purpose other than acquiring Fund shares at
a discount.
How a Letter of Intent Can Save You Money!
If you plan to invest for example $100,000 in Stagecoach or Norwest
Advantage Fund in installments over the next year, by signing a letter of
intent you would pay only 3.50% sales load on the entire purchase.
Otherwise you might pay 4.50% on the first $50,000, then 4.00% on the next
$49,999.
Class B and Class C Share CDSC Reductions:
. You pay no CDSC on Funds shares you purchase with reinvested distributions.
. We waive the CDSC for all redemptions made because of scheduled (Rule 72t
withdrawal schedule) or mandatory (withdrawals made after age 701/2
according to IRS guidelines) distributions for certain retirement plans.
(See your retirement plan disclosure for details.)
. We waive the CDSC for redemptions made in the event of the shareholder's
death or for a disability suffered after purchasing shares. ("Disability"
is defined by the Internal Revenue Code of 1986.)
. We waive the CDSC for redemptions made at the direction of Wells Fargo in
order to, for example, complete a merger or close an account whose value
has fallen below the minimum balance.
. We waive Class C share CDSCs for 401K Plan accounts offering these shares
as an investment option.
40 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
For Class B shares purchased outside of an IRA or other qualified plan after
July 17, 1999, no CDSC is imposed on withdrawals that occur under the following
circumstances:
. Withdrawals may not exceed 10% of your fund assets (including "free"
shares) annually based on your anniversary date in the Systematic
Withdrawal Plan; and
. Withdrawals are made by participating in the Systematic Withdrawal Plan;
and
. you must participate in the dividend and capital gain reinvestment program.
Waivers for Certain Parties
If you are eligible for certain waivers, we will sell you Class A shares so you
can avoid higher on-going expenses. The following people can buy Class A shares
at NAV:
. Current and retired employees, directors and officers of:
. Stagecoach Funds and its affiliates;
. Wells Fargo Bank, Norwest Bank and their affiliates;
. Stephens and its affiliates; and
. Broker-Dealers who act as selling agents.
. The spouses of any of the above, as well as the grandparents, parents,
siblings, children, grandchildren, aunts, uncles, nieces, nephews, fathers-
in-law, mothers-in-law, brothers-in-law and sisters-in-law of either the
spouse or the current or retired employee, director of officer.
You may also buy Class A Fund shares at NAV if they are to be included in
certain retirement, benefits, pension or investment "wrap accounts" with whom
Stagecoach Funds has reached an agreement, or through an omnibus account
maintained with a Fund by a broker/dealer.
We reserve the right to enter into agreements that reduce or eliminate sales
charges for groups or classes of shareholders, or for Fund shares included in
other investment plans such as "wrap accounts." If you own Fund shares as part
of another account or package such as an IRA or a sweep account, you must read
the directions for that account. These directions may supersede the terms and
conditions discussed here.
Stagecoach Allocation Funds Prospectus 41
<PAGE>
Reduced Sales Charges
- --------------------------------------------------------------------------------
Distribution Plan
We have adopted Distribution Plans pursuant to Rule 12b-1 for the Class A, Class
B and Class C shares of the Funds. The plans authorize the payment of all or
part of the cost of preparing and distributing prospectuses and distribution-
related services including ongoing compensation to selling agents. The fees paid
under these plans are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Fund Class A Class B Class C
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation Fund .05% .70% .75%
- -------------------------------------------------------------------------
Index Allocation Fund .25% .75% .75%
- -------------------------------------------------------------------------
U.S. Government Allocation Fund .05% .70% N/A
- -------------------------------------------------------------------------
</TABLE>
These fees are paid out of the Funds' assets on an on-going basis. Overtime,
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
42 Stagecoach Allocation Funds Prospectus
<PAGE>
Exchanges
- --------------------------------------------------------------------------------
Exchanges between Stagecoach Funds are two transactions: a sale of shares of one
Fund and the purchase of shares of another. In general, the same rules and
procedures that apply to sales and purchases apply to exchanges. There are,
however, additional factors you should keep in mind while making or considering
an exchange:
. You should carefully read the Prospectus for the Fund into which you wish
to exchange.
. Every exchange involves selling Fund shares and that sale may produce a
capital gain or loss for federal income tax purposes.
. If you are making an initial investment into a new Fund through an
exchange, you must exchange at least the minimum first purchase amount of
the Fund you are redeeming, unless your balance has fallen below that
amount due to market conditions.
. Any exchange between Funds you already own must meet the minimum redemption
and subsequent purchase amounts for the Funds involved.
. Exchanges between Class B shares, between Class C shares or between either
Class B or Class C shares and a Wells Fargo money market fund will not
trigger the CDSC. The new shares will continue to age according to their
original schedule while in the new Fund and will be charged the CDSC
applicable to the original shares upon redemption.
. Exchanges from any share class to a money market fund can only be re-
exchanged for the original share class.
. In order to discourage excessive Fund transaction expenses that must be
borne by other shareholders, we reserve the right to limit or reject
exchange orders. Generally, we will notify you 60 days in advance of any
changes in your exchange privileges.
. You may make exchanges between like share classes. You may also exchange
from Class A, Class B or Class C shares and non-institutional class shares
to a non-institutional money market fund.
Stagecoach Allocation Funds Prospectus 43
<PAGE>
Your Account
- --------------------------------------------------------------------------------
This section tells you how Fund shares are priced, how to open an account and
how to buy and sell Fund shares once your account is open.
Pricing Fund Shares:
. As with all mutual fund investments, the price you pay to purchase shares
or the price you receive when you redeem shares is not determined until
after a request has been received in proper form.
. We determine the Net Asset Value ("NAV") of each class of the Funds' shares
each business day as of the close of regular trading on the NYSE. We
determine the NAV by subtracting the Fund class's liabilities from its
total assets, and then dividing the result by the total number of
outstanding shares of that class. Each Fund's assets are generally valued
at current market prices. See the Statement of Additional Information for
further disclosure.
. We process requests to buy or sell shares of the funds each business day as
of the close of regular trading on the New York Stock Exchange ("NYSE"),
which is usually 1:00 p.m. (Pacific time)/3:00 p.m. (Central time). If the
markets close early, the Funds may close early and may value their shares
at earlier times under these circumstances. Any request we receive in
proper form before these times is processed the same day. Requests we
receive after the cutoff times are processed the next business day.
. The funds are open for business on each day the NYSE is open for business.
NYSE holidays include New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. When any holiday falls on a weekend,
the NYSE typically is closed on the weekday immediately before or after
such holiday.
You Can Buy Fund Shares:
. By opening an account directly with the Fund (simply complete and return a
Stagecoach Funds application with proper payment);
. Through a brokerage account with an approved selling agent; or
. Through certain retirement, benefits and pension plans, or through certain
packaged investment products (please see the providers of the plan for
instructions).
44 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Minimum Investments:
. $1,000 per Fund minimum initial investment;/1/ or
. $100 per Fund if you use the Systematic Purchase Program; and
. $100 per Fund for all investments after your first.
/1/ Purchases of Class B shares in amounts of $250,000 or more require the prior
approval of your selling agent.
We may waive the minimum for Funds you purchase through certain retirement,
benefit and pension plans, through certain packaged investment products, or for
certain classes of shareholders as permitted by the SEC. Check the specific
disclosure statements and applications for the program through which you intend
to invest.
Stagecoach Allocation Funds Prospectus 45
<PAGE>
Your Account
- --------------------------------------------------------------------------------
Important Shareholder Information
The instructions below describe how to buy and sell shares through the period
ended July 17, 1999. After that date, please refer to the instructions on page
50 to 53.
How to Buy Shares
The following section explains how you can buy shares directly from Stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your Selling Agent.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
By Mail
- -------------------------------------------------------------------------------------
<S> <C>
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------------
Complete a Stagecoach Funds application. Be sure to indicate
the Fund name and the share class into which you intend to
invest. Failure to complete an application properly may result Mail to:
in a delay in processing your request. Stagecoach Funds
- ----------------------------------------------------------------
PO Box 7066
Enclose a check for at least $1,000 made out in the full name San Francisco, CA
and share class of the Fund. For example, "Asset Allocation 94120-9201
Fund, Class B."
- ----------------------------------------------------------------
You may start your account with $100 if you elect the Systematic
Purchase Plan option on the application.
- -------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- -------------------------------------------------------------------------------------
Make a check payable to the full name and share class of your Mail to:
Fund for at least $100. Be sure to write your account number on Stagecoach Funds
the check as well. PO Box 7066
- ----------------------------------------------------------------
San Francisco, CA
94120-9201
- -------------------------------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- -------------------------------------------------------------------------------------
</TABLE>
46 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
BY WIRE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- --------------------------------------------------------------------------------------------
If you do not currently have an account, complete a Stagecoach Mail to:
Funds application. You must wire at least $1,000. Be sure to Stagecoach Funds
indicate the fund name and the share class into which you intend PO Box 7066
to invest. San Francisco, CA
- ------------------------------------------------------------------
Mail the completed application. 94120-9201
- ------------------------------------------------------------------
You may also fax the completed application (with original Fax to:
to follow). 1-415-546-0280
- ------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- --------------------------------------------------------------------------------------------
Instruct your wiring bank to transmit Wire to:
at least $100 according to the instructions Wells Fargo Bank, N.A.
given to the right. Be sure to have the San Francisco, CA
wiring bank include your current account 94120-9201
number and the name your account is
registered in. Bank Routing Number:
121000248
- -------------------------------------------
Wire Purchase Account Number:
4068-000587
Attention:
Stagecoach Funds (Name of Fund and Share Class)
Account Name:
(Registration Name Indicated on Application)
- --------------------------------------------------------------------------------------------
</TABLE>
Stagecoach Allocation Funds Prospectus 47
<PAGE>
Your Account
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
BY PHONE
- ------------------------------------------------------------------------------------------
<S> <C>
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ------------------------------------------------------------------------------------------
You can only make your first purchase of a Fund by phone if you
already have an existing Stagecoach Funds Trust Account.
- -----------------------------------------------------------------
Call Investor Services and instruct the representative to either: Call:
. transfer at least $1,000 from a linked settlement account, or 1-800-222-8222
. exchange at least $1,000 worth of shares from an existing
Stagecoach Fund. Please see "Exchanges" for special rules.
- ------------------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- ------------------------------------------------------------------------------------------
Call Investor Services and instruct the representative to either:
. transfer at least $100 from a linked settlement account, or Call:
. exchange at least $100 worth of shares from another Stagecoach 1-800-222-8222
Fund.
- ------------------------------------------------------------------------------------------
</TABLE>
Selling Shares:
The following section explains how you can sell shares held directly through an
account with Stagecoach Funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
BY MAIL
- ------------------------------------------------------------------------------------------
<S> <C>
IF YOU ARE SELLING SHARES:
- ------------------------------------------------------------------------------------------
Write a letter stating your account registration, your account
number, the Fund you wish to redeem and the dollar amount ($100
or more) of the redemption you wish to receive (or write "Full
Redemption").
- -----------------------------------------------------------------
Make sure all the account owners sign the request.
- -----------------------------------------------------------------
You may request that redemption proceeds be sent to you by check, Mail to:
by ACH transfer into a bank account, or by wire. Please call Stagecoach Funds
Investor Services regarding requirements for linking bank PO Box 7066
accounts or for wiring funds. We reserve the right to charge a San Francisco, CA
fee for wiring funds although it is not currently our practice to 94120-9201
do so.
- -----------------------------------------------------------------
Signature Guarantees are required for mailed redemption requests
over $5,000. You can get a signature guarantee at financial
institutions such as a bank or brokerage house. We do not accept
notarized signatures.
- ------------------------------------------------------------------------------------------
</TABLE>
48 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
BY PHONE
- ------------------------------------------------------------------------------------------
<S> <C>
Call Investor Services to request a redemption of at least $100.
Be prepared to provide your account number and Taxpayer
Identification Number.
- -----------------------------------------------------------------
Unless you have instructed us otherwise, only one account owner
needs to call in redemption requests.
- -----------------------------------------------------------------
You may request that redemption proceeds be sent to you by check,
by transfer into an ACH-linked bank account, or by wire. Please
call Investor Services regarding requirements for linking bank
accounts or for wiring funds. We reserve the right to charge a
fee for wiring funds although it is not currently our practice
to do so.
- -----------------------------------------------------------------
Telephone privileges are automatically made available to you Call:
unless you specifically decline them on your application or 1-800-222-8222
subsequently in writing.
- -----------------------------------------------------------------
Phone privileges allow us to accept transaction instructions by
anyone representing themselves as the shareholder and who
provides reasonable confirmation of their identity, such as
providing the Taxpayer Identification Number on the account. We
will not be liable for any losses incurred if we follow telephone
instructions we reasonably believe to be genuine.
- -----------------------------------------------------------------
Telephone requests are not accepted if the address on your
account was changed by phone in the last 15 days.
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
GENERAL NOTES FOR SELLING SHARES
- --------------------------------------------------------------------------------
We determine the NAV of the funds each day as of the close of regular trading on
the NYSE, which is generally 1:00 PM (Pacific time)/3:00 PM (Central time).
- --------------------------------------------------------------------------------
Your redemptions are net of any applicable CDSC.
- --------------------------------------------------------------------------------
We will process requests to sell shares at the first NAV calculated after a
request in proper form is received. Requests received before the cutoff times
are processed on the same business day.
- --------------------------------------------------------------------------------
If you purchased shares through a packaged investment product or retirement
plan, read the directions for selling shares provided by the product or plan.
There may be special requirements that supersede the directions in this
Prospectus.
- --------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption so that we may be
reasonably certain that investments made by check or Systematic Purchase Plan
have been collected. Payments of redemptions also may be delayed under
extraordinary circumstances or as permitted by the SEC in order to protect
remaining shareholders.
- --------------------------------------------------------------------------------
Generally, we pay redemption requests in cash, unless the redemption request is
for more than $250,000 or 1% of the net assets of the Fund by a single
shareholder over any ninety-day period. If a request for a redemption is over
these limits, it may be to the detriment of existing shareholders to pay such
redemption in cash. Therefore, we may pay all or part of the redemption in
securities of equal value.
- --------------------------------------------------------------------------------
Stagecoach Allocation Funds Prospectus 49
<PAGE>
Your Account
- ------------------------------------------------------------------------------
FOR TRANSACTIONS AFTER JULY 17, 1999
How to Buy Shares
The following section explains how you can buy shares directly from Stagecoach
Funds. For Funds held through brokerage and other types of accounts, please
consult your Selling Agent.
==============================================================================
BY MAIL
==============================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- ------------------------------------------------------------------------------
Complete a Stagecoach Fund application. Be sure to
indicate the Fund name and the share class into which
you intend to invest. Failure to complete an
application properly may result in a delay in
processing your request. Mail to:
Stagecoach Funds
- ---------------------------------------------------------
P.O. Box 8266
Enclose a check for at least $1,000 made out in the Boston, MA
full name and share class of the Fund. For example 02266-8266
"Asset Allocation Fund Class B."
- ---------------------------------------------------------
You may start your account with $100 if you elect the
Systematic Purchase Plan option on the application.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If you are buying additional shares:
- ------------------------------------------------------------------------------
Mail to:
Make a check payable to the full name and share of your Stagecoach Funds
class of your Fund for at least $100. Be sure to write PO Box 8266
your account number on the check as well. Boston, MA
02266-8266
- ------------------------------------------------------------------------------
Enclose the payment stub/card from your statement if available.
- ------------------------------------------------------------------------------
50 Stagecoach Allocation Funds Prospectus
<PAGE>
===============================================================================
BY WIRE
===============================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------
IF you do not currently have an account, complete a Mail to:
Stagecoach Funds application. You must write as least Stagecoach Funds
$1,000. Be sure to indicate the Fund name and the share PO Box 8266
class into which you intend to invest. Boston, MA
- ---------------------------------------------------------
Mail the completed application. 02266-8266
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- -------------------------------------------------------------------------------
Instruct your wiring bank to Wire to:
transmit at least $100 Stagecoach Funds
according to the instructions c/o Stage Street Bank & Trust
given to the right. Be sure to Boston, MA
have the wiring bank include
your current account number Bank Routing Number:
and the name your account is ABA 011000028
registered in.
- ------------------------------------ Wire Purchase Account Number:
9905-437-1
Attention:
Stagecoach Funds (Name of Fund and Share
Class)
Account Name:
(Registration Name Indicated on
Application)
----------------------------------------
Stagecoach Allocation Funds Prospectus 51
<PAGE>
Your Account
================================================================================
BY PHONE
================================================================================
IF YOU ARE BUYING SHARES FOR THE FIRST TIME:
- -------------------------------------------------
You can only make your first purchase of a Fund by
phone if you already have an existing Stagecoach Funds
Account. Call:
- -----------------------------------------------------------
Call Investor Services and instruct the representative 1-800-222-8222
to either:
. transfer at least $1,000 from a linked settlement
account, or
. exchange at least $1,000 worth of shares from an
existing Wells Fargo Fund. Please see "Exchanges"
for special rules.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IF YOU ARE BUYING ADDITIONAL SHARES:
- -------------------------------------------------------------------------------
Call Investor Services and instruct the representative Call:
to either: 1-800-222-8222
. transfer at least $100 from a linked settlement
account, or
. exchange at least $100 worth of shares from another
Wells Fargo Fund.
- -------------------------------------------------------------------------------
Selling Shares:
The following section explains how you can sell shares held directly through an
account with Stagecoach funds by mail or telephone. For Fund shares held through
brokerage and other types of accounts, please consult your Selling Agent.
===============================================================================
BY MAIL
===============================================================================
IF YOU ARE SELLING SHARES FOR THE FIRST TIME:
- -------------------------------------------------------------------------------
Write a letter stating your account registration, your
account number, the Fund you wish to redeem and the
dollar amount ($100 or more) of the redemption you wish
to receive (or write "Full Redemption").
- --------------------------------------------------------
Make sure all the account owners sign the request. Mail to:
- --------------------------------------------------------
You may request that redemption proceeds be sent to you Stagecoach Funds
by check, by ACH transfer into a bank account, or by PO Box 8266
wire. Please call Investor Services regarding Boston, MA
requirements for linking bank accounts or for wiring 02266-8266
funds. We reserve the right to charge a fee for wiring
funds although it is not currently our practice to do
so.
- --------------------------------------------------------
Signature guarantees are required for mailed redemption
requests over $50,000, or if the address on your
account was changed within 30 days. You can get a
Signature guarantees at financial institutions such as
a bank or brokerage house. We do not accept notarized
signatures.
- --------------------------------------------------------
52 Stagecoach Allocation Funds Prospectus
<PAGE>
===============================================================================
BY PHONE
===============================================================================
Call Investor Services to request a redemption of at
least $100. Be prepared to provide your account number
and Taxpayer Identification Number.
- -------------------------------------------------------
Unless you have instructed us otherwise only one
account owner needs to call in redemption requests.
- -------------------------------------------------------
You may request that redemption proceeds be sent to you
by check, by transfer into an ACH-linked bank account, Call:
or by wire. Please call Investor Services regarding 1-800-222-8222
requirements for linking bank accounts or for wiring
funds. We reserve the right to charge a fee for wiring
funds although it is not currently our practice to do
so.
- -------------------------------------------------------
Telephone privileges are automatically made available
to you unless you specifically decline them on your
application or subsequently in writing.
- -------------------------------------------------------
Phone privileges allow us to accept transaction
instructions by anyone representing themselves as the
shareholder and who provides reasonable confirmation of
their identity, such as providing the Taxpayer
Identification Number on the account. We will not be
liable for any losses incurred if we follow telephone
instructions we reasonably believe to be genuine.
- -------------------------------------------------------
Telephone requests are not accepted if the address on
your account was changed by phone in the last 30
days.
- --------------------------------------------------------------------------------
================================================================================
GENERAL NOTES FOR SELLING SHARES
================================================================================
We determine the NAV of the funds each day as of the close of regular trading on
the NYSE, which is generally 1:00 PM (Pacific time)/3:00 P.M. (Central time).
- --------------------------------------------------------------------------------
Your redemptions are not net of any applicable CDSC.
- --------------------------------------------------------------------------------
We will process requests to sell shares at the first NAV calculated after a
request in proper form is received. Requests received before the cutoff times
are processed on the same business day.
- --------------------------------------------------------------------------------
If you purchased shares through a packaged investment product or retirement
plan, read the directions for selling shares provided by the product or plan.
There may be special requirements that supersede the directions in this
Prospectus.
- --------------------------------------------------------------------------------
We reserve the right to delay payment of a redemption so that we may be
reasonably certain that investments made by check or Systematic Purchase Plan
have been collected. Payments of redemptions also may be delayed under
extraordinary circumstances or as permitted by the SEC in order to protect
remaining shareholders.
- --------------------------------------------------------------------------------
Generally, we pay redemption requests in cash unless the redemption request is
for more than $250,000 or 1% of the net assets of the Fund by a
singleshareholder over any ninety-day period. If a request for a redemption is
over these limits, it may be to the detriment of existing shareholders to pay
such redemption in cash. Therefore we may pay all or part of the redemption in
securities of equal value.
- --------------------------------------------------------------------------------
Stagecoach Allocation Funds Prospectus 53
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
Automatic Programs:
These programs help you conveniently purchase and/or redeem shares each month.
Once you select a Plan, tell us the day of the month you would like the
transaction to occur. If you do not specify a date, we will process the
transaction on or about the 25th day of the month. Call Investor Services at 1-
800-222-8222 for more information.
. Systematic Purchase Plan-With this program, you can regularly purchase
shares of a Wells Fargo Fund with money automatically transferred from a
linked bank account. Simply select the Fund you would like to purchase,
specify an amount of at least $100.
. Systematic Exchange Plan-With this program, you can regularly exchange
shares of a Wells Fargo Fund you own for shares of another Wells Fargo
Fund. The exchange amount must be at least $100. See the "Exchanges"
section of this Prospectus for the conditions that apply to your shares.
This feature may not be available for certain types of accounts.
. Systematic Withdrawal Plan-With this program, you can regularly redeem
shares and receive the proceeds by check or by transfer to a linked bank
account. Simply specify an amount of at least $100. To participate in this
program, you:
. must have a Fund account valued at $10,000 or more;
. must have your distributions reinvested; and
. may not simultaneously participate in the Systematic Purchase Plan.
It generally takes about ten days to establish a plan once we have received your
instructions. It generally takes about five days to change or cancel
participation in a plan. We automatically cancel your program if the linked bank
account you specified is closed.
Dividend and Capital Gain Distributions Options
The Funds in this Prospectus generally pay dividends periodically and make
capital gains distributions annually.
We pay dividends if any, quarterly for the Asset and Index Allocation Funds.
Dividends for the U.S. Government Allocation Fund, are declared daily and paid
monthly. Capital gains, if any, are distributed at least annually.
54 Stagecoach Allocation Funds Prospectus
<PAGE>
Additional Services and Other Information
- --------------------------------------------------------------------------------
We offer the following distribution options:
. Automatic Reinvestment Option-Lets you buy new shares of the same class of
the Fund that generated the distributions. The new shares are purchased at
NAV generally on the day the income is paid. This option is automatically
assigned to your account unless you specify another plan.
. Check Payment Option-Allows you to receive checks for distributions mailed
to your address of record or to another name and address which you have
specified in written, signature guaranteed instructions. If checks remain
uncashed for six months or are undeliverable by the Post Office, we will
reinvest the distributions at the earliest date possible.
Two Things To Keep In Mind About Distributions
Remember, distributions have the effect of reducing the NAV per share by
the amount distributed. Also, distributions on new shares shortly after
purchase would be in effect a return of capital,although the distribution
may still be taxable to you.
Taxes
The following discussion regarding taxes is based on laws that were in effect as
of the date of this Prospectus. The discussion summarizes only some of the
important tax considerations that affect the Funds and you as a shareholder. It
is not intended as a substitute for careful tax planning. You should consult
your tax advisor about your specific tax situation. Federal income tax
considerations are discussed further in the Statement of Additional Information.
We will pass on to you any net capital gain (generally the excess of net long-
term capital gains over net short-term capital losses) earned by a Fund as a
capital gain distribution. In general, these distributions will be taxable to
you as long-term capital gains which may qualify for taxation at preferential
rates in the hands of non-corporate shareholders. Any distribution that is not
from net investment income, short term capital gains, or net capital gain may be
characterized as a return of capital to shareholders.
Stagecoach Allocation Funds Prospectus 55
<PAGE>
- --------------------------------------------------------------------------------
Important Information for Shareholders
On March 25, 1999, the Board of Directors of Stagecoach Funds, Inc. (the
"Company") approved the reorganization of the Company's Funds into new
portfolios of Wells Fargo Funds Trust ("Funds Trust"). The reorganization is
part of a larger plan to consolidate the Wells Fargo Bank-advised fund family
with the Norwest Advantage fund family, following last November's merger of
Wells Fargo & Company and Norwest Corporation. The Company will present the
reorganization to Fund shareholders for their approval at a special shareholders
meeting that is planned for August 1999.
If the reorganization is approved by shareholders, the U.S. Government
Allocation Fund will be reorganized into the Funds Trust Intermediate Government
Income Fund. Although, respectively, the investment objectives are substantially
similar, the principal investment strategies may differ somewhat.
All of the other Funds of the Company will, if approved by shareholders, be
reorganized into new portfolios of Funds Trust that have investment objectives
and strategies that are substantially identical to the corresponding Funds. In
most cases, these substantially identical Funds Trust portfolios will not absorb
other funds.
The Funds Trust portfolios are not yet available for purchase but corresponding
portfolios within either the Stagecoach fund family or the Norwest Advantage
fund family are currently available. The Company's proxy materials, which were
mailed in June to all persons who were shareholders on May 6, 1999, will
describe the reorganization in detail, including any effect on expense ratios.
If you bought your shares after that date, you will not be entitled to vote on
the reorganization, but you may request a copy of the proxy materials.
Investors should be aware that, for certain share classes of certain Funds,
expense ratio increases of up to 0.14% are contemplated. In other cases, expense
ratios are expected to remain unchanged or decline. For the allocation
portfolios, the reorganization is expected to be a tax-free transaction. The
reorganization will not trigger any sales charges.
If you have any questions, or if you would like to request a copy of the proxy
materials, you should call 1-800-222-8222.
56 Stagecoach Allocation Funds Prospectus
<PAGE>
Glossary
- --------------------------------------------------------------------------------
We provide the following definitions to assist you in reading this prospectus.
For a more complete understanding of these terms you should consult your
financial adviser.
ACH
Refers to the "Automated Clearing House" system maintained by the Federal
Reserve Bank which allows banks to process checks, transfer funds and perform
other tasks.
American Depositary Receipts ("ADRs")
Receipts for non-U.S. company stocks. The stocks underlying ADRs are typically
held in bank vaults. The ADR's owner is entitled to any capital gains or
dividends. ADRs are one way of owning an equity interest in foreign companies.
Annual and Semi-Annual Report
A document that provides certain financial and other important information for
the most recent reporting period and each Fund's portfolio of investments.
Asset-Backed Securities
Securities consisting of an undivided fractional interest in pools of consumer
loans, such as car loans or credit card debt, or receivables held in trust.
Below Investment-Grade
Securities rated BBB or lower by S&P or Baa or lower by Moody's Investor
Services, or that may be unrated securities or securities considered to be "high
risk."
Business Day
Any day the New York Stock Exchange is open is a business day for the Funds.
Capital Appreciation, Capital Growth
The increase in the value of a security. See also "total return."
Capitalization
When referring to the size of a company, capitalization means the total number
of a company's outstanding shares of stock multiplied by the price per share.
This is an accepted method of determining a company's size and is sometimes
referred to as "market capitalization."
Capital Structure
Refers to how a company has raised money to operate. Can include, for example,
borrowing or selling stock.
Stagecoach Allocation Funds Prospectus 57
<PAGE>
Glossary
- --------------------------------------------------------------------------------
Commercial Paper
Debt instruments issued by banks, corporations and other issuers to finance
short-term credit needs. Commercial paper typically is of high credit quality
and offers below market interest rates.
Convertible Debt Securities
Bonds or notes that are exchangeable for equity securities at a set price on a
set date or at the election of the holder.
Current Income
Earnings in the form of dividends or interest as opposed to capital growth. See
also "total return."
Debt Securities
Generally, a promise to pay interest and repay principal by an individual or
group of individuals sold as a security. The owner of the security is entitled
to receive any such payments. Examples include bonds and mortgage- and other
asset-backed securities and can include securities in which the right to receive
interest and principal repayment have been sold separately.
Derivatives
Securities whose values are derived in part from the value of another security
or index. An example is a stock option.
Distributions
Dividends and/or capital gains paid by a Fund on its shares.
Diversified
A diversified fund, as defined by the Investment Company Act of 1940, is one
that invests in cash, Government securities, other investment companies and no
more than 5% of its total assets in a single issuer. These policies must apply
to 75% of the Funds' total assets.
Dollar-Denominated
Securities issued by foreign banks, companies or governments in U.S. dollars.
Dollar Rolls
Similar to a reverse Repurchase Agreement, dollar rolls are simultaneous
agreements to sell a security held in a portfolio and to purchase a similar
security at a future date at an agreed-upon price.
58 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Duration
A measure of a security's or portfolio's sensitivity to changes in interest
rates. Duration is usually expressed in years, with longer durations typically
more sensitive to interest rate changes than shorter durations.
FDIC
The Federal Deposit Insurance Corporation. This is the company that provides
federally sponsored insurance covering bank deposits such as savings accounts
and CDs. Mutual funds are not FDIC insured.
FHLMC
FHLMC securities are commonly known as "Freddie Mac" and are issued by the
Federal Home Loan Mortgage Corporation.
FNMA
FNMA securities are known as "Fannie Maes" are issued by the Federal National
Mortgage Association, and FHLMC securities as "Freddie Mac" and are issued by
the Federal Home Loan Mortgage Corporation.
GNMA
GNMA securities are commonly known as "Ginnie Maes" and are issued by the
Government National Mortgage Association.
Hedge
Strategy used to offset investment risk. A perfect hedge is one eliminating the
possibility of future gain or loss.
Illiquid Security
A security which cannot be readily sold, or cannot be readily sold without
negatively affecting its fair price.
Initial Public Offering
The first time a company's stock is offered for sale to the public.
Investment-Grade Debt
A type of bond rated in the top four investment categories by a nationally
recognized ratings organization. Generally these are bonds whose issuers are
considered to have a strong ability to pay interest and repay principal,
although some investment-grade bonds may have some speculative characteristics.
Liquidity
The ability to readily sell a security at a fair price.
Stagecoach Allocation Funds Prospectus 59
<PAGE>
Glossary
- --------------------------------------------------------------------------------
Money Market Instruments
High-quality short-term instruments meeting the requirements of Rule 2a-7 of
the1940 Act, such as bankers' acceptances, commercial paper, repurchase
agreements and government obligations. In a money market fund, average portfolio
maturity does not exceed 90 days, and all investments have maturities of 397
days or less at the time of purchase.
Moody's
A nationally recognized ratings organization.
Nationally Recognized Rating Organization (NRRO)
A company that examines the ability of a bond issuer to meet its obligations and
which rates the bonds accordingly.
Net Asset Value (NAV)
The value of a single fund share. It is determined by adding together all of a
Fund's assets, subtracting accrued expenses and other liabilities, then dividing
by the total number of shares. The NAV is calculated separately for each class
of the Fund, and is determined as of the close of regular trading on each
business day the NYSE is open, typically 1:00 P.M. (Pacific time).
Options
An option is the right to buy or sell a security based on an agreed upon price
for at a specified time. For example, an option may give the holder of a stock
the right to sell the stock to another party, allowing the seller to profit if
the price has fallen below the agreed price. Options may also be based on the
movement of an index such as the S&P 500.
Preservation of Capital
The attempt by a fund's manager to reduce drops in the net asset value of fund
shares in order to preserve the initial investment.
Principal Stability
The degree to which share prices for a fund remain steady. Money market funds
attempt to achieve the highest degree of principal stability by maintaining a
$1.00 per share net asset value. More aggressive funds may not consider
principal stability an objective.
Public Offering Price (POP)
The NAV with the sales load added.
60 Stagecoach Allocation Funds Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Price-to-Earnings Ratio
The ratio between a stock's price and its historical, current or anticipated
earnings. Low ratios typically indicate a high yield. High ratios are
characteristic of growth stocks which generally have low current yields.
Repurchase Agreement
An agreement between a buyer and seller of a security in which the seller agrees
to repurchase the security at an agreed upon price and time.
Russell 1000 Index
An index comprised of the 1000 largest firms listed on the Russell 3000 Index.
The Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
1000 is considered a "large cap" index.
Russell 2000 Index
An index comprised of the 2000 smallest firms listed on the Russell 3000 Index.
The Russell 3000 Index is a listing of 3000 corporations by the Frank Russell
Company that is intended to be representative of the U.S. economy. The Russell
2000 is considered a "small cap" index.
Selling Agent
A person who has an agreement with the Funds' distributors that allows them to
sell a Fund's shares.
Shareholder Servicing Agent
Anyone appointed by the Fund to maintain shareholder accounts and records,
assist and provide information to shareholders or perform similar functions.
Signature Guarantee
A guarantee given by a financial institution that has verified the identity of
the maker of the signature.
S&P, S&P 500 Index
Standard & Poor's, a nationally recognized ratings organization. S&P's also
publishes various indexes or lists of companies representative of sectors of the
U.S. economy.
Statement of Additional Information
A document that supplements the disclosure made in the Prospectus.
Stagecoach Allocation Funds Prospectus 61
<PAGE>
Glossary
- --------------------------------------------------------------------------------
Stripped Treasury Securities
Debt obligations in which the interest payments and the repayment of principal
are separated and sold as securities.
Taxpayer Identification Number
Usually the social security number for an individual or the Employer
Identification Number for a corporation.
Total Return
The total value of capital growth and the value of all distributions, assuming
that distributions were used to purchase additional shares of the Funds.
Turnover Ratio
The percentage of the securities held in a Fund's portfolio, other than short-
term securities, that were bought or sold within a year.
Undervalued
Describes a stock that is believed to be worth more than its current price.
U.S. Government Obligations
Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Value Strategy
A strategy of investing which tries to identify and buy undervalued stocks under
the assumption that the stock will eventually rise to its "fair market" value.
Warrants
The right to buy a stock at a set price for a set time.
Weighted-Average Maturity
The average maturity for the debt securities in a portfolio on a dollar-for-
dollar basis.
Zero Coupon Bonds
Bonds that make no periodic interest payments and which are usually sold at a
discount of their face value. Zero coupon bonds are subject to interest rate and
credit risk.
62 Stagecoach Allocation Funds Prospectus
<PAGE>
You may wish to review the following documents:
Statement of Additional Information
supplements the disclosures made by this Prospectus. The Statement of Additional
Information has been filed with the SEC and is incorporated by reference into
this Prospectus and is legally part of this Prospectus.
Annual/Semi-Annual Report
Provides certain financial and other important information including a
discussion of the market conditions and investment strategies that significantly
affected Fund performance, for the most recent reporting period.
These documents are available free of charge:
Call 1-800-222-8222, or write to:
STAGECOACH FUNDS(R) [STAMP APPEARS HERE]
PO Box 7066
San Francisco, CA
94120-7066
Visit the SEC's web site:
http://www.sec.gov, or
Request copies for a fee by writing to:
SEC Public Reference Room,
Washington, DC 20549-6009
(call: 1-800-SEC-0330 for details)
<PAGE>
STAGECOACH FUNDS, INC.
Telephone: 1-800-222-8222
STATEMENT OF ADDITIONAL INFORMATION
Dated June 30, 1999
ASSET ALLOCATION FUND
INDEX ALLOCATION FUND
U.S. GOVERNMENT ALLOCATION FUND
CLASS A, CLASS B AND CLASS C
Stagecoach Funds, Inc. (the "Company") is an open-end, management
investment company. This Statement of Additional Information ("SAI") contains
additional information about three funds in the Stagecoach Family of Funds
(each, a "Fund" and collectively, the "Funds") -- the ASSET ALLOCATION, INDEX
ALLOCATION and U.S. GOVERNMENT ALLOCATION FUNDS. Each Fund offers Class A
shares and Class B shares. The Asset Allocation and Index Allocation Funds also
offer Class C shares. This SAI relates to all such classes of shares.
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated June 30, 1999. All terms used in this SAI that are
defined in the Prospectus have the meaning assigned in the Prospectus. A copy
of the Prospectus may be obtained without charge by calling 1-800-222-8222 or
writing to Stagecoach Funds, P.O. Box 7066, San Francisco, CA 94120-7066 (or
after July 16, 1999, to Stagecoach Funds P.O. Box 8266, Boston, MA 02266-8266).
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Historical Fund Information........................................................... 1
Investment Restrictions............................................................... 1
Investment Models..................................................................... 5
Additional Permitted Investment Activities............................................ 9
Risk Factors.......................................................................... 20
Management............................................................................ 22
Performance Calculations.............................................................. 37
Determination of Net Asset Value...................................................... 45
Additional Purchase and Redemption Information........................................ 45
Portfolio Transactions................................................................ 46
Fund Expenses......................................................................... 48
Federal Income Taxes.................................................................. 49
Capital Stock......................................................................... 55
Other................................................................................. 58
Counsel............................................................................... 58
Independent Auditors.................................................................. 58
Financial Information................................................................. 58
Appendix.............................................................................. A-1
</TABLE>
<PAGE>
HISTORICAL FUND INFORMATION
The Company's Asset Allocation Fund commenced operations on January 2,
1992, as successor to the Asset Allocation Fund of the Wells Fargo Investment
Trust for Retirement Programs. The predecessor fund's commencement of
operations was November 13, 1986. The Class B shares commenced operations on
January 1, 1995, and the Class C shares commenced operations on April 1, 1998.
The Company's Index Allocation Fund was originally organized on April 7,
1988 as the Asset Allocation Fund of Overland Express Funds, Inc. ("Overland"),
another open-end management investment company advised by Wells Fargo Bank. The
Overland Asset Allocation Fund changed its name to the Index Allocation Fund on
February 14, 1997. On July 23, 1997, the Boards of the Directors of the Company
and Overland approved an Agreement and Plan of Consolidation providing for,
among other things, the transfer of the assets and stated liabilities of the
predecessor Overland portfolio to the Fund. Prior to December 12, 1997, the
effective date of the consolidation of the Company and Overland (the
"Consolidation"), the Fund had only nominal assets. As a result of the
Consolidation, the Overland Index Allocation Fund was reorganized as the
Company's Index Allocation Fund on December 12, 1997, and shareholders of the
Overland Index Allocation Fund's Class A and Class D shares became Class A and
Class C shareholders, respectively, of the Company's Index Allocation Fund.
The Company's U.S. Government Allocation Fund commenced operations on
January 2, 1992 as successor to the Fixed-Income Strategy Fund of the Wells
Fargo Investment Trust for Retirement Programs. The predecessor fund's
commencement of operations was March 31, 1987. The Class B shares commenced
operations on January 1, 1995.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
-------------------------------
Each Fund has adopted the following investment restrictions, all of which
are fundamental policies; that is, they may not be changed without approval by
the vote of the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of the outstanding voting securities of
such Fund.
The Asset Allocation Fund and U.S. Government Allocation Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of any Fund's investments in that industry would be 25% or
more of the current value of its total assets, provided that there is no
limitation with respect to investments in (i) obligations of the United States
Government, its agencies or instrumentalities, (ii) in the case of the Asset
Allocation Fund, any industry in which the S&P 500 Index becomes
1
<PAGE>
concentrated to the same degree during the same period, and (iii) in the case of
the Asset Allocation Fund, money market instruments invested in the banking
industry and in obligations of the U.S. Government, its agencies or
instrumentalities (but the Fund will not do so unless the U.S. Securities and
Exchange Commission ("SEC") staff confirms that it does not object to the Fund
reserving freedom of action to concentrate investments in the banking industry);
and provided further, that each Fund may invest all of its assets in a
diversified, open-end management investment company, or a series thereof, with
substantially the same investment objective, policies and restrictions as such
Fund, without regard to the limitations set forth in this paragraph (1);
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein);
(3) purchase or sell commodities or commodity contracts; except that each
Fund may purchase and sell (i.e., write) options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices, and may participate in interest rate and index swaps;
(4) purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions and except for margin payments in connection
with transactions in options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices) or make
short sales of securities;
(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an underwriting;
and provided further, that the purchase by a Fund of securities issued by a
diversified, open-end management investment company, or a series thereof, with
substantially the same investment objective, policies and restrictions as such
Fund shall not constitute an underwriting for purposes of this paragraph (6);
(7) make investments for the purpose of exercising control or management;
(8) issue senior securities, except to the extent the activities permitted
in Investment Restrictions Nos. 3 and 5 may be deemed to give rise to a senior
security but do not violate the provisions of section 18 of the 1940 Act, and
except that each Fund may borrow from banks up to 20% of the current value of
each such Fund's net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20% of
the current value of each such Fund's net assets
2
<PAGE>
(but investments may not be purchased by such Funds while any such outstanding
borrowings exceed 5% of the respective Fund's net assets);
(9) write, purchase or sell puts, calls, straddles, spreads, warrants,
options or any combination thereof, except that each Fund may engage in options
transactions to the extent permitted in Investment Restrictions Nos. 3 and 5,
and except that each Fund may purchase securities with put rights in order to
maintain liquidity; nor
(10) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, more than 5% of the value of a Fund's total assets would be invested in
the securities of any one issuer or such Fund's ownership would be more than 10%
of the outstanding voting securities of such issuer, provided that a Fund may
invest all its assets in a diversified, open-end management investment company,
or a series thereof, with substantially the same investment objective, policies
and restrictions as such Fund, without regard to the limitations set forth in
this paragraph (10).
Each of the Asset Allocation and U.S. Government Allocation Funds may make
loans in accordance with its investment policies.
As a fundamental policy, each of the Asset Allocation and U.S. Government
Allocation Funds may invest, notwithstanding any other investment restrictions
(whether or not fundamental), all of its assets in the securities of a single
open-end, management investment company with substantially the same fundamental
investment objectives, policies and restrictions as such Fund. A decision to so
invest all of its assets may, depending on the circumstances applicable at the
time, require approval of shareholders.
The Index Allocation Fund may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would exceed 25%
of the current value of its total assets, provided that there is no limitation
with respect to investments in (i) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payments of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers); (ii) obligations of
the United States Government, its agencies or instrumentalities; (iii) any
industry in which the S&P Index becomes concentrated to the same degree during
the same period; and (iv) the obligations of domestic banks;
(2) purchase or sell real estate (other than municipal obligations or
other securities secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein),
commodities or commodity contracts; except that the Fund may purchase and sell
(i.e., write) options, forward contracts, futures contracts, including those
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<PAGE>
relating to indices, and options on futures contracts or indices, and may
participate in interest rate swaps and index swaps;
(3) purchase securities on margin or make short sales of securities
(except for short-term credits necessary for the clearance of transactions and
except that the Fund may make margin payments in connection with transactions in
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices);
(4) underwrite securities of other issuers, except to the extent that the
purchase of municipal securities or other permitted investments directly from
the issuer thereof or from an underwriter for an issuer and the later
disposition of such securities in accordance with the Fund's investment program
may be deemed to be an underwriting;
(5) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, restricted securities,
which are securities that must be registered under the Securities Act of 1933
before they may be offered or sold to the public, and illiquid securities;
(6) make investments for the purpose of exercising control or management;
(7) issue senior securities, except to the extent the activities of the
Fund permitted in Investment Restrictions Nos. 2 and 3 may be deemed to give
rise to a senior security but do not violate the provisions of section 18 of the
1940 Act, and except that the Fund may borrow from banks up to 10% of the
current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10% of
the current value of its net assets (but investments may not be purchased while
any such borrowing exists); nor
(8) invest more than 10% of the current value of its net assets in fixed
time deposits that are subject to withdrawal penalties and that have maturities
of more than seven days.
In addition, the Fund may not write, purchase or sell puts, calls, warrants
or options or any combination thereof, except that the Fund may purchase
securities with put rights in order to maintain liquidity, and except that the
Fund may engage in options transactions to the extent permitted in Investment
Restrictions Nos. 2 and 3.
The Fund may not, as to 75% of its total assets, purchase securities of any
issuer (except securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities) if, as a result, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or, with
respect to 100% of its assets, the Fund's ownership would be more than 10% of
the outstanding voting securities of such issuer.
4
<PAGE>
Non-Fundamental Investment Policies
-----------------------------------
Each Fund has adopted the following non-fundamental policies which may be
changed by a majority vote of the Board of Directors of the Company at any time
and without approval of such Fund's shareholders.
(1) Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Fund's investment in such securities currently is limited
to , subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Fund's net assets with respect to any one
investment company, and (iii) 10% of such Fund's net assets in the aggregate.
Other investment companies in which the Funds invest can be expected to charge
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by a Fund.
(2) Each Fund may not invest or hold more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable within seven
days.
(3) Each Fund may invest up to 25% of its net assets in securities of
foreign governmental and foreign private issuers that are denominated in and pay
interest in U.S. dollars.
(4) Each Fund may lend securities from its portfolio to brokers, dealers
and financial institutions, in amounts not to exceed (in the aggregate) one-
third of a Fund's total assets. Any such loans of portfolio securities will be
fully collateralized based on values that are marked to market daily. The Funds
will not enter into any portfolio security lending arrangement having a duration
of longer than one year.
INVESTMENT MODELS
This section contains supplemental information about the proprietary
investment model used by Barclays Global Fund Advisors ("BGFA") to manage each
Fund's portfolio.
Asset Allocation Model. BGFA compares the Asset Allocation Fund's
----------------------
investments daily to the Asset Allocation Model's recommended allocation. The
investment model recommends allocations among each asset class in 5% increments
only. Any recommended reallocation will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not
5
<PAGE>
be acted upon for as long as two or three months thereafter depending on factors
such as the percentage change from previous recommendations and the consistency
of recommended reallocations over a period of time. In addition, the Asset
Allocation Fund generally will invest the net proceeds from the sale of shares
of the Fund and will liquidate existing Fund investments to meet net redemption
requirements in a manner that best allows the Fund's existing asset allocation
to follow that recommended by the Model. Notwithstanding any recommendation of
the Model to the contrary, the Asset Allocation Fund will generally maintain at
least that portion of its assets in money market instruments reasonably
considered necessary to meet redemption requirements. In general, cash
maintained for short-term liquidity needs is only invested in U.S. Treasury
bills, shares of other mutual funds and repurchase agreements. There is no
requirement that the Fund maintain positions in any particular asset class or
classes.
Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Asset Allocation Model. The performance of each of those
other portfolios is likely to vary among themselves and from the performance of
the Fund. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and differences
in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which
make up the S&P 500 Index. Standard & Poor's Ratings Group ("S&P") occasionally
makes changes in the S&P 500 Index based on its criteria for inclusion of stocks
in the S&P 500 Index. The S&P 500 Index is market-capitalization-weighted so
that each stock in the S&P 500 Index represents its proportion of the total
market value of all stocks in the S&P 500 Index. In making its stock
investments, the policy of the Asset Allocation Fund is to invest its assets in
substantially the same stocks, and in substantially the same percentages, as the
S&P 500 Index, including Wells Fargo & Company stock.
A key component of the Asset Allocation Model is a set of assumptions
concerning expected risk and return and investor attitudes toward risk which are
incorporated into the asset allocation decision. The principal inputs of
financial data to the Asset Allocation Model currently are (i) consensus
estimates of the earnings, dividends and payout ratios on a broad cross-section
of common stocks as reported by independent financial reporting services which
survey a broad cross-section of Wall Street analysts, (ii) the estimated current
yield to maturity on new long-term corporate bonds rated "AA" by S&P, (iii) the
present yield on money market instruments, (iv) the historical statistical
standard deviation in investment return for each class of asset, and (v) the
historical statistical correlation of investment returns among the various asset
classes in which the Asset Allocation Fund invests. Using these data, the Asset
Allocation Model is run daily to determine the recommended asset allocation.
The model's recommendations are presently made in 5% increments.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the
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<PAGE>
Model's recommendations if it believes such a change is desirable for the Fund.
Nevertheless, Wells Fargo Bank has continuing and exclusive authority over the
management of the Fund, the conduct of its affairs and the disposition of the
Funds' assets, and Wells Fargo Bank has the right to reject BGFA's investment
decisions for the Fund if Wells Fargo Bank determines that any such decision is
not consistent with the best interests of the Fund.
Index Allocation Model. BGFA compares the Index Allocation Fund's
----------------------
investments daily to the Index Allocation Model's recommended allocation. The
investment model recommends allocations among each asset class in 5% increments
only. Any recommended reallocation will be implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Under current trading policies
employed by BGFA, recommended reallocations may be implemented promptly upon
receipt of recommendations or may not be acted upon for as long as two or three
months thereafter depending on factors such as the percentage change from
previous recommendations and the consistency of recommended reallocations over a
period of time. In addition, the Index Allocation Fund generally will invest
the net proceeds from the sale of shares of the Fund and will liquidate existing
Fund investments to meet net redemption requirements in a manner that best
allows the Fund's existing asset allocation to follow that recommended by the
Model. Notwithstanding any recommendation of the Model to the contrary, the
Index Allocation Fund will generally maintain at least that portion of its
assets in money market instruments reasonably considered necessary to meet
redemption requirements. In general, cash maintained for short-term liquidity
needs is only invested in U.S. Treasury bills, shares of other mutual funds and
repurchase agreements. There is no requirement that the Fund maintain positions
in any particular asset class or classes.
Wells Fargo Bank and BGFA manage other portfolios which also invest in
accordance with the Index Allocation Model. The performance of each of those
other portfolios is likely to vary among themselves and from the performance of
the Fund. Such variation in performance is primarily due to different
equilibrium asset mix assumptions used for the various portfolios, timing
differences in the implementation of the model's recommendations and differences
in expenses and liquidity requirements.
There are 500 common stocks, including Wells Fargo & Company stock, which
make up the S&P 500 Index. S&P occasionally makes changes in the S&P 500 Index
based on its criteria for inclusion of stocks in the S&P 500 Index. The S&P 500
Index is market-capitalization-weighted so that each stock in the S&P 500 Index
represents its proportion of the total market value of all stocks in the S&P 500
Index. In making its stock investments, the policy of the Index Allocation Fund
is to invest its assets in substantially the same stocks, and in substantially
the same percentages, as the S&P 500 Index, including Wells Fargo & Company
stock. The Lehman Brothers 20+ Treasury Bond Index (the "LBT Bond Index") is an
unmanaged index comprised of U.S. Treasury Securities with remaining maturities
of twenty years or more. The portion of the Fund's
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<PAGE>
portfolio allocated to bonds is invested so as to replicate the performance
characteristics of the LBT Bond Index.
A key component of the Index Allocation Model is a set of assumptions
concerning expected risk and return and investor attitudes toward risk which are
incorporated into the index allocation decision. The principal inputs of
financial data to the Index Allocation Model currently are (i) consensus
estimates of the earnings, dividends and payout ratios on a broad cross-section
of common stocks as reported by independent financial reporting services which
survey a broad cross-section of Wall Street analysts, (ii) the estimated current
yield to maturity on new long-term corporate bonds rated "AA" by S&P, (iii) the
present yield on money market instruments, (iv) the historical statistical
standard deviation in investment return for each class of asset, and (v) the
historical statistical correlation of investment returns among the various asset
classes in which the Index Allocation Fund invests. Using these data, the Index
Allocation Model is run daily to determine the recommended asset allocation.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the Model's recommendations if it believes such a change is desirable
for the Fund. Nevertheless, Wells Fargo Bank has continuing and exclusive
authority over the management of the Fund, the conduct of its affairs and the
disposition of the Funds' assets, and Wells Fargo Bank has the right to reject
BGFA's investment decisions for the Fund if Wells Fargo Bank determines that any
such decision is not consistent with the best interests of the Fund.
U.S. Government Allocation Model. BGFA compares the U.S. Government
--------------------------------
Allocation Fund's investments daily to the U.S. Government Allocation Model's
recommended allocation. The investment model recommends allocations among each
asset class in 5% increments only. Any recommended reallocation will be
implemented in accordance with trading policies that have been designed to take
advantage of market opportunities and to reduce transaction costs. Under current
trading policies employed by BGFA, recommended reallocations may be implemented
promptly upon receipt of recommendations or may not be acted upon for as long as
two to three months thereafter depending on factors such as the percentage
change from previous recommendations and the consistency of recommended
reallocations over a period of time. In addition, the U.S. Government Allocation
Fund generally will invest the net proceeds from the sale of shares of the Fund
and will liquidate existing Fund investments to meet net redemption requirements
in a manner that best allows the Fund's existing asset allocation to follow the
allocation recommended by the computer Model. Notwithstanding any recommendation
of the computer model to the contrary, the Fund will generally maintain at least
that portion of its assets in money market instruments reasonably considered
necessary to meet redemption requirements. In general, cash maintained for
short-term liquidity needs is only invested in U.S. Treasury bills, shares other
mutual funds and repurchase agreements. There is no requirement that the Fund
maintain positions in any particular asset class or classes.
8
<PAGE>
BGFA manages other funds which invest in accordance with a substantially
similar version of the Model. The performance of each of those other funds is
likely to vary among themselves and from the performance of the U.S. Government
Allocation Fund. Such variation in performance is primarily due to timing
differences in the implementation of the Model's recommendations, differences in
expenses and liquidity requirements, and the ability of other funds to invest a
higher portion of their assets in short-term investments that may generate a
higher yield, but are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
A key component of the U.S. Government Allocation Model is a set of
assumptions concerning expected risk and return and investor attitudes toward
risk, which are incorporated into the allocation decision. The principal inputs
of financial data to the model currently are: (i) yields on 90-day U.S. Treasury
bills, 5-year U.S. Treasury notes and 30-year U.S. Treasury bonds; (ii) the
expected statistical standard deviation in investment returns for each class of
fixed income instrument; and (iii) the expected statistical correlation of
investment return among the various classes of fixed income instruments. Using
these and other data, the Model is run daily to determine the recommended
allocation. The Model's recommendations are presently implemented in 10%
increments. Because the Fund may shift its investment allocations significantly
from time to time, its performance may differ from funds which invest in one
asset class or from funds with a constant mix of assets.
Although BGFA intends to use the Model as bases for its investment
decisions, BGFA may change from time to time the criteria and methods it uses to
implement the Model's recommendations if it believes such a change is desirable
for the Fund. Nevertheless, Wells Fargo Bank has continuing and exclusive
authority over the management of the Fund, the conduct of its affairs and the
disposition of the Funds' assets, and Wells Fargo Bank has the right to reject
BGFA's investment decisions for the Fund if Wells Fargo Bank determines that any
such decision is not consistent with the best interests of the Fund.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Set forth below are descriptions of certain investments and additional
investment policies for the Funds.
Bonds
-----
The Funds may purchase U.S. Treasury bonds with maturities greater than 20
years. The bond portion of the portfolio of the Funds is generally managed to
attain an average maturity of between 22 and 28 years for the U.S. Treasury
bonds held. This form of debt instrument has been selected by BGFA because of
the relatively low transaction costs of buying and selling U.S. Treasury bonds
and because of the low default risk associated with such instruments.
9
<PAGE>
Derivative Securities
---------------------
Some of the permissible investments described herein are considered
"derivative" securities because their value is derived, at least in part, from
the price of another security or a specified asset, index or rate. For example,
the futures contracts and options on futures contracts that the Funds may
purchase are considered derivatives. The Funds may only purchase or sell these
contracts or options as substitutes for comparable market positions in the
underlying securities. Also, asset-backed securities issued or guaranteed by
U.S. Government agencies or instrumentalities and certain floating- and
variable-rate instruments can be considered derivatives. Some derivatives may
be more sensitive than direct securities to changes in interest rates or sudden
market moves. Some derivatives also may be susceptible to fluctuations in yield
or value due to their structure or contract terms. Wells Fargo Bank and BGFA
use a variety of internal risk management procedures to ensure that derivatives
use is consistent with a Fund's investment objective, does not expose the Fund
to undue risk and is closely monitored. These procedures include providing
periodic reports to the Board of Directors concerning the use of derivatives.
Also, cash maintained by the Index Allocation Fund for short-term liquidity
needs (e.g., to meet anticipated redemption requests) will, as a general matter,
only be invested in U.S. Treasury bills, shares of other mutual funds and
repurchase agreements. The use of derivatives by the Asset Allocation, Index
Allocation and U.S. Government Allocation Funds also is subject to broadly
applicable investment policies. For example, a Fund may not invest more than a
specified percentage of its assets in "illiquid securities," including those
derivatives that do not have active secondary markets. Nor may a Fund use
certain derivatives without establishing adequate "cover" in compliance with SEC
rules limiting the use of leverage.
Floating- and Variable-Rate Instruments
---------------------------------------
Certain of the debt instruments in which the Funds may invest bear interest
rates that are periodically adjusted at specified intervals or whenever a
benchmark rate or index change. These adjustments generally limit the increase
or decrease in the amount of interest received on debt instruments. The Funds
may purchase certificates of participation in pools of floating- and variable-
rate instruments from banks and other financial institutions. Wells Fargo Bank,
as investment advisor, monitors on an ongoing basis the ability of an issuer of
a demand instrument to pay principal and interest on demand. Events occurring
between the date a Fund elects to demand payment on a floating- or variable-rate
instrument and the date payment is due may affect the ability of the issuer of
the instrument to make payment when due, and unless such demand instrument
permits same-day settlement, such events may affect a Fund's ability to obtain
payment at par. Demand instruments whose demand feature is not exercisable
within seven days may be treated as liquid, provided that an active secondary
market exists.
Foreign Obligations
-------------------
Each Fund may invest up to 25% of its assets in high-quality, short-term
debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are
10
<PAGE>
denominated in and pay interest in U.S. dollars. Investments by the Funds in
foreign obligations involve certain considerations that are not typically
associated with investing in domestic obligations. There may be less publicly
available information about a foreign issuer than about a domestic issuer.
Foreign issuers also are not generally subject to uniform accounting, auditing
and financial reporting standards or governmental supervision comparable to
those applicable to domestic issuers. In addition, with respect to certain
foreign countries, taxes may be withheld at the source under foreign income tax
laws, and there is a possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments that could adversely
affect investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery
---------------------------------------------------------------
Transactions
- ------------
The Funds may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased or
sold on a when-issued, delayed-delivery or forward commitment basis involve a
risk of loss if the value of the security to be purchased declines, or the value
of the security to be sold increases, before the settlement date. Although the
Funds will generally purchase securities with the intention of acquiring them,
the Funds may dispose of securities purchased on a when-issued, delayed-delivery
or a forward commitment basis before settlement when deemed appropriate by the
advisor. Securities purchased on a when-issued or forward commitment basis may
expose the relevant Fund to risk because they may experience price fluctuations
prior to their actual delivery. Purchasing securities on a when-issued or
forward commitment basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself.
The Funds will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
Futures Contracts and Options Transactions
------------------------------------------
In General. The Funds may enter into and engage in futures contracts and
options transactions as discussed below. A futures transaction involves a firm
agreement to buy or sell a commodity or financial instrument at a particular
price on a specified future date, while an option transaction generally involves
a right, which may or may not be exercised, to buy or sell a commodity or
financial instrument at a particular price on a specified future date. Futures
contracts and options are standardized and exchange-traded, where the exchange
serves as the ultimate counterparty for all contracts. Consequently, the
primary credit risk on futures contracts is the creditworthiness of the
exchange. Futures contracts, however, are subject to market risk (i.e.,
exposure to adverse price changes).
11
<PAGE>
Although the Funds intend to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for specified
periods during the trading day. Futures contract prices could move to the limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting a
Fund to substantial losses. If it is not possible, or a Fund determines not to
close a futures position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments of variation margin.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer (i.e., seller) of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put). Upon exercise of the option, the assumption
of offsetting futures positions by both the writer and the holder of the option
will be accompanied by delivery of the accumulated cash balance in the writer's
futures margin account in the amount by which the market price of the futures
contract, at exercise, exceeds (in the case of a call) or is less than (in the
case of a put) the exercise price of the option on the futures contract. The
potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because
the value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option may change daily, and that change would be reflected in
the net asset value of the relevant Fund.
The Funds may trade futures contracts and options on futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade and the International
Monetary Market of the Chicago Mercantile Exchange. The Funds' futures
transactions must constitute permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission ("CFTC"). In addition,
the Funds may not engage in futures transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired options on futures
contracts, other than those contracts entered into for bona fide hedging
purposes, would exceed 5% of the liquidation value of a Fund's assets, after
taking into account unrealized profits and unrealized losses on such contracts;
provided, however, that in the case of an option on a futures contract that is
in-the money at the time of purchase, the in-the money amount may be excluded in
calculating the 5% liquidation amount. Pursuant to regulations and/or published
positions of the SEC, a Fund may be required to segregate cash or high-quality
money-market instruments in connection with its futures transactions in an
amount generally equal to the entire value of the underlying security.
12
<PAGE>
Initially, when purchasing or selling futures contracts a Fund will be
required to deposit with its custodian in the broker's name an amount of cash or
cash equivalents up to approximately 10% of the contract amount. This amount is
subject to change by the exchange or board of trade on which the contract is
traded, and members of such exchange or board of trade may impose their own
higher requirements. This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin", to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable. At any
time prior to the expiration of a futures contract, a Fund may elect to close
the position by taking an opposite position, at the then prevailing price,
thereby terminating its existing position in the contract.
The Funds may engage in futures contracts sales to maintain the income
advantage from continued holding of a long-term security while endeavoring to
avoid part or all of the loss in market value that would otherwise accompany a
decline in long-term security prices. If, however, securities prices rise, a
Fund would realize a loss in closing out its futures contract sales that would
offset any increases in prices of the long-term securities they hold.
Another risk in employing futures contracts and options thereon to protect
against cash market price volatility is the possibility that futures prices will
correlate imperfectly with the behavior of the prices of the securities in such
portfolio (the portfolio securities will not be identical to the debt
instruments underlying the futures contracts).
Stock Index Options. The Funds may purchase and write (i.e., sell) put and
call options on stock indices only as a substitute for comparable market
positions in the underlying securities. The aggregate premiums paid on all
options purchased by a Fund may not exceed 20% of the Fund's total assets and
the value of the options written may not exceed 10% of the value of the Fund's
total assets.
A stock index fluctuates with changes of the market values of the stocks
included in the index. The effectiveness of purchasing or writing stock index
options will depend upon the extent to which price movements of the securities
in a Fund's portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether a Fund
will realize a gain or loss from purchasing or writing stock index options
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of particular stock. When a Fund writes an
option on a stock index, such Fund will place in a segregated account with the
Fund's custodian cash or liquid securities in an amount at least equal to the
market value of the underlying stock index and will maintain the account while
the option is open or otherwise will cover the transaction.
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<PAGE>
Stock Index Futures and Options on Stock Index Futures. The Funds may
invest in stock index futures and options on stock index futures only as a
substitute for a comparable market position in the underlying securities. A
stock index future obligates the seller to deliver (and the purchaser to take),
effectively, an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect
to stock indices that are permitted investments, each Fund intends to purchase
and sell futures contracts on the stock index for which it can obtain the best
price with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. The Funds may invest in interest-rate futures contracts and options
on interest-rate futures contracts as a substitute for a comparable market
position in the underlying securities. The Funds may also sell options on
interest-rate futures contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that such closing
transactions can be effected or as to the degree of correlation between price
movements in the options on interest-rate futures and price movements in the
Funds' portfolio securities which are the subject of the transaction.
The Index Allocation Fund will not enter into interest rate futures
contracts and options thereon, for which the aggregate initial margin and
premiums exceed 5% of the fair market value of its assets, after taking into
account unrealized profits and unrealized losses on any such contracts into
which they have entered; provided, however, that the "in-the-money" amount of an
option that was in-the-money at the time of purchase will be excluded in
computing such 5%.
The Asset Allocation, Index Allocation and U.S. Government Allocation Funds
may take advantage of opportunities in the areas of options and futures
contracts and options on futures contracts and any other derivative investments
which are not presently contemplated for use by the Fund or which are not
currently available but which may be developed, to the extent such opportunities
are both consistent with each Fund's investment objective and legally
permissible for the Fund. Before entering into such transactions or making any
such investment, the Fund would provide appropriate disclosure in its Prospectus
or this SAI.
Interest-Rate and Index Swaps. The Funds may enter into interest-rate and
index swaps in pursuit of its investment objectives. Interest-rate swaps
involve the exchange by a Fund with another party of their commitments to pay or
receive interest (for example, an exchange of floating-rate payments for fixed-
rate payments). Index swaps involve the exchange by the Fund with another party
of cash flows based upon the performance of an index of securities or a portion
of an index of securities that usually include dividends or income. In each
case, the exchange commitments can involve payments to be made in the same
currency or in different currencies. A Fund will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. If the Fund enters into a swap, it will maintain a segregated account
on a gross basis, unless the contract
14
<PAGE>
provides for a segregated account on a net basis. If there is a default by the
other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction.
The use of interest-rate and index swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
the Funds. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of payments
that the Fund is contractually obligated to make. There is also a risk of a
default by the other party to a swap, in which case a Fund may not receive net
amount of payments that such Fund contractually is entitled to receive. The
Funds may invest up to 10% of their net assets in interest-rate and index swaps.
Foreign Currency Transactions. The Asset Allocation and U.S. Government
Allocation Funds may enter into foreign currency transactions. When a Fund
enters into a foreign currency transaction or forward contract, such Fund
deposits, if required by applicable regulations, with the Fund's custodian cash
or high-grade debt securities in a segregated account an amount at least equal
to the value of the Fund's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities are placed in the account so
that the value of the account equals the amount of the Fund's commitment with
respect to the contract.
At or before the maturity of a forward contract, a Fund either may sell a
portfolio security and make delivery of the currency, or may retain the security
and offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which such Fund obtains, on the same maturity date,
the same amount of the currency which it is obligated to deliver. If the Fund
retains the portfolio security and engages in an offsetting transaction, such
Fund, at the time of execution of the offsetting transaction, incurs a gain or a
loss to the extent that movement has occurred in forward contract prices.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices
increase, the Fund will suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed to sell.
The cost to a Fund of engaging in currency transactions varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because transactions in currency exchange usually
are conducted on a principal basis, no fees or commissions are involved. Wells
Fargo Bank or BGFA, as appropriate, considers on an ongoing basis the
creditworthiness of the institutions with
15
<PAGE>
which a Fund enters into foreign currency transactions. The use of forward
currency exchange contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. If a devaluation generally is anticipated, the Fund may
not be able to contract to sell the currency at a price above the devaluation
level it anticipates.
The purchase of options on currency futures allows a Fund, for the price of
the premium it must pay for the option, to decide whether or not to buy (in the
case of a call option) or to sell (in the case of a put option) a futures
contract at a specified price at any time during the period before the option
expires.
Illiquid Securities
-------------------
The Funds may invest in securities not registered under the 1933 Act and
other securities subject to legal or other restrictions on resale. Because such
securities may be less liquid than other investments, they may be difficult to
sell promptly at an acceptable price. Delay or difficulty in selling securities
may result in a loss or be costly to a Fund. Each Fund may invest up to 15% of
its net assets in illiquid securities.
Loans of Portfolio Securities
-----------------------------
The Funds may lend securities from their portfolios to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt instruments equal to at least 100% of the
current market value of the securities loan (including accrued interest thereon)
plus the interest payable to such Fund with respect to the loan is maintained
with the Fund. In determining whether to lend a security to a particular
broker, dealer or financial institution, Wells Fargo Bank or BGFA will consider
all relevant facts and circumstances, including the creditworthiness of the
broker, dealer, or financial institution. Any loans of portfolio securities
will be fully collateralized based on values that are marked to market daily.
The Funds will not enter into any portfolio security lending arrangement having
a duration of longer than one year. The principal risk of portfolio lending is
potential default or insolvency of the borrower. In either of these cases, a
Fund could experience delays in recovering securities or collateral or could
lose all or part of the value of the loaned securities. Any securities that a
Fund may receive as collateral will not become part of the Fund's portfolio at
the time of the loan and, in the event of a default by the borrower, the Fund
will, if permitted by law, dispose of such collateral except for such part
thereof that is a security in which the Fund is permitted to invest. During the
time securities are on loan, the borrower will pay such Fund any accrued income
on those securities, and the Fund may invest the cash collateral and earn
additional income or receive an agreed-upon fee from a borrower that has
delivered cash-equivalent collateral. None of the Funds will lend securities
having a value that exceeds one-third of the current value of its total assets.
Loans of securities by any of the Funds will be subject to termination at the
Fund's or the borrower's option. The Funds may pay reasonable administrative
and custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect
16
<PAGE>
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers may not be affiliated, directly or indirectly, with the Company, its
Advisor, or its Distributor.
Money Market Instruments and Temporary Investments
--------------------------------------------------
Each Fund may invest varying percentages of their assets in money market
instruments. In addition, the Funds may invest temporary cash balances in the
following high-quality money market instruments: (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, including
government-sponsored enterprises ("U.S. Government obligations"); (ii)
negotiable certificates of deposit, bankers' acceptances and fixed time deposits
and other obligations of domestic banks (including foreign branches) that have
more than $ 1 billion in total assets at the time of investment and are members
of the Federal Reserve System or are examined by the Comptroller of the Currency
or whose deposits are insured by the Federal Deposit Insurance Corporation
("FDIC"); (iii) commercial paper rated at the date of purchase "P-1" by Moody's
Investors Service, Inc. ("Moody's") or "A-1+" or "A-1" by S&P, or, if unrated,
of comparable quality as determined by Wells Fargo Bank, as investment advisor;
(iv) nonconvertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of no more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that at the time of investment have more than $10 billion, or the
equivalent in other currencies, in total assets and in the opinion of Wells
Fargo Bank, as investment advisor, are of comparable quality to obligations of
U.S. banks which may be purchased by a Fund.
Letters of Credit. Certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other short-term
obligations) which the Funds may purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Only banks, savings and loan
associations and insurance companies which, in the opinion of Wells Fargo Bank
or BGFA, are of comparable quality to issuers of other permitted investments of
such Fund may be used for letter of credit-backed investments.
Repurchase Agreements. Each Fund may enter into repurchase agreements,
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually agreed upon time and price. A Fund may enter into
repurchase agreements only with respect to securities that could otherwise be
purchased by the Fund. All repurchase agreements will be fully collateralized
at 102% based on values that are marked to market daily. The maturities of the
underlying securities in a repurchase agreement transaction may be greater than
twelve months, although the maximum term of a repurchase agreement will always
be less than twelve months. If the seller defaults and the value of the
underlying securities has declined, a Fund may incur a loss. In addition, if
bankruptcy proceedings are
17
<PAGE>
commenced with respect to the seller of the security, the Fund's disposition of
the security may be delayed or limited.
Each Fund may not enter into a repurchase agreement with a maturity of more
than seven days, if, as a result, more than 15% of the market value of such
Fund's total net assets would be invested in repurchase agreements with
maturities of more than seven days, restricted securities and illiquid
securities. A Fund will only enter into repurchase agreements with primary
broker/dealers and commercial banks that meet guidelines established by the
Board of Directors and that are not affiliated with the investment advisor. The
Funds may participate in pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
Other Investment Companies
--------------------------
The Funds may invest in shares of other open-end management investment
companies, up to the limits prescribed in Section 12(d) of the 1940 Act. Under
the 1940 Act, a Fund's investment in such securities currently is limited to,
subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of such Fund's net assets with respect to any one
investment company and (iii) 10% of such Fund's net assets in aggregate. Other
investment companies in which the Funds invest can be expected to charge fees
for operating expenses such as investment advisory and administration fees, that
would be in addition to those charged by the Funds.
Pass-Through Obligations
------------------------
The Funds may invest in pass-through obligations that are supported by the
full faith and credit of the U.S. Government (such as those issued by the
Government National Mortgage Association ("GNMA")) or those that are guaranteed
by an agency or instrumentality of the U.S. Government or government-sponsored
enterprise (such as the Federal National Mortgage Association ("FNMA") or the
Federal Home Loan Mortgage Corporation ("FHLMC")) or bonds collateralized by any
of the foregoing.
Short-Term Corporate Debt Instruments
-------------------------------------
Each Fund may invest in commercial paper (including variable amount master
demand notes), which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.
The Funds also may invest in nonconvertible corporate debt securities
(e.g., bonds and debentures) with no more than one year remaining to maturity at
the date of settlement.
18
<PAGE>
The Funds will invest only in such corporate bonds and debentures that are rated
at the time of purchase at least "Aa" by Moody's or "AA" by S&P.
Unrated Investments
-------------------
The Funds, may purchase instruments that are not rated if, in the opinion
of Wells Fargo Bank, such obligations are of investment quality comparable to
other rated investments that are permitted to be purchased by such Fund. After
purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by such Fund. Neither event
will require a sale of such security by such Fund. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, each Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in its Prospectus and in this SAI. The ratings of Moody's and S&P are more
fully described in the Appendix.
U.S. Government Obligations
---------------------------
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations").
Payment of principal and interest on U.S. Government Obligations (i) may be
backed by the full faith and credit of the United States (as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the
U.S. Government will provide financial support to its agencies or
instrumentalities where it is not obligated to do so. In addition, U.S.
Government Obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
Warrants
--------
The Funds each may invest in warrants (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specific price valid for a specific period of time.
The price of warrants do not necessarily correlate with the prices of the
underlying securities.
19
<PAGE>
When-Issued Securities
----------------------
The Funds may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Delivery and payment
on such transactions normally take place within 120 days after the date of the
commitment to purchase. Securities purchased or sold on a when-issued, delayed-
delivery or forward commitment basis involve a risk of loss if the value of the
security to be purchased declines, or the value of the security to be sold
increases, before the settlement date. Although each Fund will generally
purchase securities with the intention of acquiring them, a Fund may dispose of
securities purchased on a when-issued, delayed-delivery or a forward commitment
basis before settlement when deemed appropriate by the advisor.
Each Fund will segregate cash, U.S. Government obligations or other high-
quality debt instruments in an amount at least equal in value to such Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
RISK FACTORS
Investments in a Fund are not bank deposits or obligations of Wells Fargo
Bank, are not insured by the FDIC and are not insured against loss of principal.
When the value of the securities that a Fund owns declines, so does the value of
your Fund shares. You should be prepared to accept some risk with the money you
invest in a Fund.
The portfolio equity securities of each Fund are subject to equity market
risk. Equity market risk is the risk that stock prices will fluctuate or
decline over short or even extended periods. Throughout most of 1998 and through
the date of this SAI, the stock market, as measured by the S&P 500 Index and
other commonly used indices, was trading at or close to record levels. There can
be no guarantee that these performance levels will continue. The portfolio debt
instruments of a Fund are subject to credit and interest-rate risk. Credit risk
is the risk that issuers of the debt instruments in which a Fund invests may
default on the payment of principal and/or interest. Interest-rate risk is the
risk that increases in market interest rates may adversely affect the value of
the debt instruments in which a Fund invests and hence the value of your
investment in a Fund.
The market value of a Fund's investment in fixed-income securities will
change in response to various factors, such as changes in interest rates and the
relative financial strength of an issuer. During periods of falling interest
rates, the value of fixed-income securities generally rises. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. Debt securities with longer maturities, which tend to produce higher
yields, are subject to potentially greater price fluctuation than obligations
with shorter maturities. Fluctuations in the market value of fixed income
securities can be reduced, but not eliminated, by variable and floating rate
features.
20
<PAGE>
Securities rated in the fourth highest rating category are regarded by S&P
as having an adequate capacity to pay interest and repay principal, but changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make such repayments. Moody's considers such securities as
having speculative characteristics. Subsequent to its purchase by a Fund, an
issue of securities may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by a Fund. Securities rated below the
fourth highest rating category (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's credit-worthiness. The market prices of
these securities may fluctuate more than higher quality securities and may
decline significantly in periods of general economic difficulty.
Illiquid securities, which may include certain restricted securities, may
be difficult to sell promptly at an acceptable price. Certain restricted
securities may be subject to legal restrictions on resale. Delay or difficulty
in selling securities may result in a loss or be costly to the Fund.
The advisor may use certain derivative investments or techniques, such as
buying and selling options and futures contracts and entering into currency
exchange contracts or swap agreements, to adjust the risk and return
characteristics of the Fund's investments. Derivatives are financial
instruments whose value is derived, at least in part, from the price of another
security or a specified asset, index or rate. Some derivatives may be more
sensitive than direct securities to changes in interest rates or sudden market
moves. Some derivatives also may be susceptible to fluctuations in yield,
duration or value due to their structure or contract terms. If the advisor
judges market conditions incorrectly, the use of certain derivatives could
result in a loss, regardless of the advisor's intent in using the derivatives.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products.
MANAGEMENT
The following information supplements, and should be read in conjunction
with, the section in the Prospectus entitled "Organization and Management of the
Funds." The principal occupations during the past five years of the Directors
and principal executive Officer of the Company are listed below. The address of
each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas
72201. Directors deemed to be "interested persons" of the Company for purposes
of the 1940 Act are indicated by an asterisk.
Principal Occupations
Name, Age and Address Position During Past 5 Years
- --------------------- -------- -------------------
21
<PAGE>
<TABLE>
<S> <C> <C>
Jack S. Euphrat, 75 Director Private Investor.
415 Walsh Road
Atherton, CA 94027
*R. Greg Feltus, 46 Director, Executive Vice President of Stephens Inc.;
Chairman and President of Stephens Insurance Services Inc.;
President Senior Vice President of Stephens Sports
Management Inc.; and President of Investor
Brokerage Insurance Inc.
Thomas S. Goho, 55 Director Associate Professor of Finance of the School
321 Beechcliff Court of Business and Accounting at Wake Forest
Winston-Salem, NC 27104 University since 1982.
Peter G. Gordon, 54 Director Chairman and Co-Founder of Crystal Geyser
Crystal Geyser Water Co. Water Company and President of Crystal Geyser
55 Francisco St. Roxane Water Company since 1977.
San Francisco, CA 94133
Joseph N. Hankin, 57 Director President of Westchester Community College
75 Grasslands Road since 1971; Adjunct Professor of Columbia
Valhalla, NY 10595 University Teachers College since 1976.
*W. Rodney Hughes, 71 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
*J. Tucker Morse, 53 Director Private Investor; Chairman of Home Account
4 Beaufain Street Network, Inc. Real Estate Developer; Chairman
Charleston, SC 29401 of Renaissance Properties Ltd.; President of
Morse Investment Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 41 Chief Operating Vice President of Stephens Inc.; Director of
Officer, Stephens Sports Management Inc.; and Director
Secretary and of Capo Inc.
Treasurer
</TABLE>
22
<PAGE>
Compensation Table
Period ended February 28, 1999
------------------------------
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant and
Name and Position from Registrant Wells Fargo Fund Complex
- ----------------- --------------- ------------------------
<S> <C> <C>
Jack S. Euphrat $25,750 $34,500
Director
R. Greg Feltus $ 0 $ 0
Director
Thomas S. Goho $25,750 $34,500
Director
Peter G. Gordon $24,250 $30,500
Director
Joseph N. Hankin $25,750 $34,500
Director
W. Rodney Hughes $25,250 $33,000
Director
Robert M. Joses $ 1,500 $ 4,000
Director
J. Tucker Morse $25,250 $33,000
Director
</TABLE>
As of January 1, 1998, Peter G. Gordon replaced Robert M. Joses on the
Board of Directors of the Wells Fargo Fund Complex.
Directors of the Company are compensated annually by the Company and by all
the registrants in each fund complex they serve as indicated above and also are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. The Company, Stagecoach Trust and Life & Annuity Trust are considered
to be members of the same fund complexes as such term is defined in Form N-1A
under the 1940 Act (the "Wells Fargo Fund Complex"). Overland Express Funds,
Inc. and Master Investment Trust, two investment companies previously advised by
Wells Fargo Bank, were part of the Wells Fargo Fund Complex prior to December
12, 1997. These companies are no longer part of the Wells Fargo Fund Complex.
MasterWorks Funds Inc., Master Investment Portfolio, and Managed Series
Investment Trust together form a separate fund complex (the "BGFA Fund
Complex"). Each of the Directors and Officers of the Company serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end
23
<PAGE>
management investment company in both the Wells Fargo and BGFA Fund Complexes,
except for Joseph N. Hankin and Peter G. Gordon, who only serve the
aforementioned members of the Wells Fargo Fund Complex. The Directors are
compensated by other companies and trusts within a fund complex for their
services as directors/trustees to such companies and trusts. Currently the
Directors do not receive any retirement benefits or deferred compensation from
the Company or any other member of each fund complex.
As of the date of this SAI, Directors and Officers of the Company as a
group beneficially owned less than 1% of the outstanding shares of the Company.
INVESTMENT ADVISOR. Wells Fargo Bank provides investment advisory services
------------------
to the Funds. As Investment Advisor, Wells Fargo Bank furnishes investment
guidance and policy direction in connection with the daily portfolio management
of the Funds. Wells Fargo Bank furnishes to the Company's Board of Directors
periodic reports on the investment strategy and performance of each Fund. Wells
Fargo Bank provides the Funds with, among other things, money market security
and fixed-income research, analysis and statistical and economic data and
information concerning interest rate and securities markets trends, portfolio
composition, and credit conditions.
As compensation for its advisory services, Wells Fargo Bank is entitled to
receive a monthly fee at the annual rate, indicated below, of each Fund's
average daily net assets:
Annual Rate
Fund (as percentage of net assets)
---- ----------------------------
Asset Allocation 0.50% up to $250 million
0.40% next $250 million
0.30% over $500 million
U.S. Government Allocation 0.50% up to $250 million
0.40% next $250 million
0.30% over $500 million
Index Allocation 0.70% up to $500 million
0.60% over $500 million
Asset Allocation and U.S. Government Allocation Funds. Prior to April 29,
-----------------------------------------------------
1996, the Funds each invested directly in a portfolio of securities and Wells
Fargo Bank provided investment advisory services directly to the Funds. On
April 29, 1996, the Funds were converted to a "master/feeder structure" and
began to invest all of their respective assets in a corresponding Master
Portfolio, with an identical investment objective, of Master Investment Trust,
another open-end investment company. The Master Portfolios were advised by
Wells Fargo Bank and Wells Fargo Bank was entitled to receive the same level of
advisory fees from the Master Portfolios as it receives from the Funds. These
Funds
24
<PAGE>
operated as part of a master/feeder structure from April 29, 1996 to December
12, 1997, at which time the master/feeder structure was dissolved.
Index Allocation Fund. Prior to the Consolidation, Wells Fargo Bank served
---------------------
as Investment Advisor to the Overland Index Allocation predecessor portfolio and
was entitled to receive the same level of advisory fees from the predecessor
portfolio as it now receives from the Index Allocation Fund.
For the periods indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees and Wells Fargo Bank waived the indicated amounts:
<TABLE>
Eleven Months Ended Year Ended
2/28/99 3/31/98/1/
---------- ----------
Fees Paid Fees Waived Fees Paid Fees Waived
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Asset Allocation $5,217,515 $ 0 $4,747,339 $ 7,060
U.S. Government Allocation $ 391,349 $43,152 $ 359,100 $108,848
Index Allocation $1,007,592 $ 846 $ 226,717 $ 9,389
</TABLE>
______________________
/1/ Index Allocation Fund is for the 3-month period ended 3/31/98.
For the periods indicated below, the Funds paid to Wells Fargo Bank the
following advisory fees. Wells Fargo Bank has not waived any advisory fees paid
by the Asset Allocation or U.S. Government Allocation Funds, the predecessor
portfolio or the Master Portfolios.
<TABLE>
Six-Month Nine-Month
Period Ended Period Ended
Fund 3/31/97 9/30/96/1/
- ---- ------- ----------
<S> <C> <C>
Asset Allocation/1/ $2,132,577 $ 3,117,722
U.S. Government
Allocation $ 254,002 $ 539,657
</TABLE>
______________________
/1/ For the Asset Allocation and U.S. Government Allocation Funds, these
amounts include both amounts paid by the Fund for the period from 1/1/96 to
4/28/96 and amounts paid by the corresponding Master Portfolio for the
period from 4/29/96 to 9/30/96.
For the periods indicated below, Wells Fargo Bank paid the following
advisory fees. Wells Fargo Bank has not waived any advisory fees paid by the
Index Allocation Fund or the predecessor portfolio, except during 1996 it waived
$1,324 in advisory fees payable by the Fund's predecessor portfolio.
25
<PAGE>
<TABLE>
Year Ended Year Ended
Fund 12/31/97 12/31/96
- ---- -------- --------
<S> <C> <C>
Index Allocation/2/ $742,203 $525,093
</TABLE>
__________________
/2/ These amounts reflect amounts paid by the Overland predecessor portfolio.
General. Each Fund's Advisory Contract will continue in effect for more
-------
than two years from the effective date provided the continuance is approved
annually (i) by the holders of a majority of the respective Fund's outstanding
voting securities or by the Company's Board of Directors and (ii) by a majority
of the Directors of the Company who are not parties to the Advisory Contract or
"interested persons" (as defined in the 1940 Act) of any such party. A Fund's
Advisory Contract may be terminated on 60 days' written notice by either party
and will terminate automatically if assigned.
INVESTMENT SUB-ADVISOR. Wells Fargo Bank has engaged BGFA to serve as
----------------------
Investment Sub-Advisor to each Fund. Subject to the direction of the Company's
Board of Directors and the overall supervision and control of Wells Fargo Bank
and the Company, BGFA makes recommendations regarding the investment and
reinvestment of the Funds' assets. BGFA is responsible for implementing and
monitors the performance of the proprietary investment models employed with
respect to a Fund. BGFA furnishes to Wells Fargo Bank periodic reports on the
investment activity and performance of the Funds. BGFA and also furnishes such
additional reports and information as Wells Fargo Bank and the Company's Board
of Directors and officers may reasonably request.
As compensation for its sub-advisory services, BGFA is entitled to receive
a monthly fee equal to an annual rate of 0.20% of the first $500 million of the
Asset Allocation and Index Allocation Funds' average daily net assets, 0.15% of
the next $500 million of the Funds' net assets, and 0.10% of net assets over $1
billion. As compensation for sub-advisory services for the U.S. Government
Allocation Fund, BGFA is entitled to receive a monthly fee equal to an annual
rate of 0.05% of the first $100 million of the U.S. Government Allocation Fund's
average daily net assets, 0.04% of the next $50 million of the Fund's net
assets, and 0.03% of net assets over $150 million. These fees may be paid by
Wells Fargo Bank or directly by the Fund. If the sub-advisory fee is paid
directly by the Fund, the compensation paid to Wells Fargo Bank for advisory
fees will be reduced accordingly.
The predecessor Master Portfolios were also sub-advised by BGFA, and from
October 30, 1997 to December 12, 1997, BGFA was entitled to receive the fees
described above. Prior to October 30, 1997, BGFA was entitled to receive a
monthly fee equal to an annual rate of 0.20% of the Asset Allocation and Index
Allocation Funds' average daily net assets, and 0.15% of the U.S. Government
Allocation Fund's average daily net assets plus an annual payment of $40,000.
26
<PAGE>
BGFA was created by the reorganization of Wells Fargo Nikko Investment
Advisors ("WFNIA"), a former affiliate of Wells Fargo Bank, with and into an
affiliate of Wells Fargo Institutional Trust Company, N.A. Prior to January 1,
1996, WFNIA served as sub-advisor to the Funds and the predecessor portfolios
under substantially similar terms as are currently in effect.
For the period indicated below, the Wells Fargo Bank paid to BGFA the
following sub-advisory fees, without waivers:
<TABLE>
Eleven Six-Month
Months Ended Year Ended Period Ended
Fund 2/28/99 3/31/98 3/31/97
----- -------- ---------- --------
<S> <C> <C> <C>
Asset Allocation/1/ $1,912,713 $2,262,864 $ 52,443
U.S. Government Allocation/1/ $ 41,792 $ 123,818 $ 9,971
Index Allocation/2/ $ 213,662 $ 209,220 $201,715
</TABLE>
________________
/1/ For the Asset Allocation and U.S. Government Allocation Funds, these
amounts reflect amounts paid by the corresponding Master Portfolio.
/2/ Prior to December 12, 1997, this amount reflects fees paid by the Overland
predecessor portfolio.
For the periods indicated below Wells Fargo Bank paid to BGFA/WFNIA the
sub-advisory fees indicated. No sub-advisory fees were waived during these
periods.
<TABLE>
Nine-Month
Period Ended
Fund 9/30/96/1/
----- -----------
<S> <C>
Asset Allocation $ 1,714,245
U.S. Government Allocation $ 192,067
</TABLE>
____________________
/1/ These amounts include both amounts paid by the Fund for the period from
1/1/96 to 4/28/96 and amounts paid by the corresponding Master Portfolio
for the period from 4/29/96 to 9/30/96.
For the periods indicated below Wells Fargo Bank to BGFA/WFNIA the
sub-advisory fee indicated. No sub-advisory fees were waived during these
periods.
<TABLE>
Year Ended
Fund 12/31/96
---- --------
<S> <C>
Index Allocation/1/ $ 210,226
</TABLE>
____________________
/1/ These amounts reflect amounts paid by the Overland predecessor portfolio.
General. Each Fund's Sub-Advisory Contract will continue in effect for
-------
more than two years from the effective date provided the continuance is approved
annually
27
<PAGE>
(i) by the holders of a majority of the respective Fund's outstanding
voting securities or (ii) by the Company's Board of Directors, including a
majority of the Directors of the Company who are not parties to the Sub-Advisory
Contract or "interested persons" (as defined in the 1940 Act) of any such party.
A Fund's Sub-Advisory Contract may be terminated on 60 days written notice by
either party and will terminate automatically if assigned.
ADMINISTRATOR AND CO-ADMINISTRATOR. The Company has retained Wells Fargo
----------------------------------
Bank as Administrator and Stephens Inc. ("Stephens") as Co-Administrator on
behalf of each Fund. Under the respective Administration and Co-Administration
Agreements among Wells Fargo Bank, Stephens and the Company, Wells Fargo Bank
and Stephens shall provide as administration services, among other things: (i)
general supervision of the Funds' operations, including coordination of the
services performed by each Fund's investment advisor, transfer agent, custodian,
shareholder servicing agent(s), independent auditors and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions;
and preparation of proxy statements and shareholder reports for each Fund; and
(ii) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Company's officers and Board
of Directors. Wells Fargo Bank and Stephens also furnish office space and
certain facilities required for conducting the Funds' business together with
ordinary clerical and bookkeeping services. Stephens pays the compensation of
the Company's Directors, officers and employees who are affiliated with
Stephens. The Administrator and Co-Administrator are entitled to receive a
monthly fee of 0.03% and 0.04%, respectively, of the average daily net assets of
each Fund. Prior to February 1, 1998, the Administrator and Co-Administrator
were entitled to receive a monthly fee of 0.04% and 0.02%, respectively, of the
average daily net assets of each Fund. In connection with the change in fees,
the responsibility for performing various administration services was shifted to
the Co-Administrator.
Prior to February 1, 1997, Stephens served as sole Administrator to the
Funds. Stephens performed substantially the same services now provided by
Stephens and Wells Fargo Bank and was entitled to receive for its services a fee
of 0.05% of the Asset Allocation and U.S. Government Allocation Funds' average
daily net assets. Stephens was entitled to receive a monthly fee from the Index
Allocation predecessor portfolio at the annual rate of 0.10% of its average
daily net assets up to $200 million and 0.05% in excess of $200 million.
For the periods indicated below, the Funds paid to Wells Fargo Bank and
Stephens the following dollar amounts for administration and co-administration
fees:
28
<PAGE>
<TABLE>
<CAPTION>
Eleven Months
Ended
2/28/99
--------
Fund Total Wells Fargo Stephens
---- ----- ------------- ---------
<S> <C> <C> <C>
Asset Allocation $1,057,283 $454,632 $602,651
U.S. Government Allocation $ 60,830 $ 26,157 $ 34,673
Index Allocation $ 100,844 $ 43,363 $ 57,481
</TABLE>
<TABLE>
<CAPTION>
Year-Ended
3/31/98
--------
Fund Total Wells Fargo Stephens
---- ----- ------------- ----------
<S> <C> <C> <C>
Asset Allocation $826,553 $553,791 $272,762
U.S. Government Allocation $ 56,777 $ 38,041 $ 18,736
Index Allocation/1/ $ 22,424 $ 15,024 $ 7,400
</TABLE>
_________________
/1/ This amount is for the three-month period ended 3/31/98.
For the periods indicated below, the Asset Allocation and U.S. Government
Allocation Funds and the predecessor portfolio paid to Stephens the following
dollar amounts for administration fees:
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
Fund 3/31/97 9/30/96
---- -------- --------
<S> <C> <C>
Asset Allocation $186,005 $257,419
U.S. Government Allocation $ 15,092 $ 32,354
</TABLE>
For the periods indicated below, the Index Allocation Fund paid to Stephens
the following dollar amounts for administration fees:
<TABLE>
<CAPTION>
Year Ended Year Ended
Fund 12/31/97 12/31/96
---- --------- ---------
<S> <C> <C>
Index Allocation/1/ $ 61,260 $ 75,203
</TABLE>
____________________
/*/ These amounts reflect amounts paid by the Overland predecessor portfolio.
For 1996, this amount is for the year ended December 31, 1996.
DISTRIBUTOR. Stephens (the "Distributor"), located at 111 Center Street,
-----------
Little Rock, Arkansas 72201, serves as Distributor for the Funds. Each Fund has
adopted a distribution plan (a "Plan") under Section 12(b) of the 1940 Act and
Rule 12b-1
29
<PAGE>
thereunder (the "Rule") for its shares. The Plans were adopted by the Company's
Board of Directors, including a majority of the Directors who were not
"interested persons" (as defined in the 1940 Act) of the Funds and who had no
direct or indirect financial interest in the operation of the Plans or in any
agreement related to the Plans (the "Non-Interested Directors").
Under the Plans, and pursuant to the related Distribution Agreement, the
Funds may pay Stephens the amounts below as compensation for distribution-
related services or as reimbursement for distribution-related expenses. The
fees are expressed as a percentage of the average daily net assets attributable
to each Class.
<TABLE>
<CAPTION>
Fund Fee
---- ---
<S> <C>
Asset Allocation
Class B 0.70%
Class C 0.75%
U.S. Government Allocation
Class B 0.70%
Index Allocation
Class A 0.25%
Class B 0.75%
Class C 0.75%
</TABLE>
The actual fee payable to the Distributor by the above-indicated Classes is
determined, within such limits, from time to time by mutual agreement between
the Company and the Distributor and will not exceed the maximum sales charges
payable by mutual funds sold by members of the National Association of
Securities Dealers, Inc. ("NASD") under the Conduct Rules of the NASD. The
Distributor may enter into selling agreements with one or more selling agents
(which may include Wells Fargo Bank and its affiliates), under which such agents
may receive compensation for distribution-related services from the Distributor,
including, but not limited to, commissions or other payments to such agents
based on the average daily net assets of Fund shares attributable to their
customers. The Distributor may retain any portion of the total distribution fee
payable thereunder to compensate it for distribution-related services provided
by it or to reimburse it for other distribution-related expenses.
Under the Plans in effect for the Class A shares of the Asset Allocation
and U.S. Government Allocation Funds, each Fund may defray all or part of the
cost of preparing and printing prospectuses and other promotional materials and
of delivering prospectuses and promotional materials to prospective shareholders
by paying on an annual basis up to 0.05% of the respective Fund's average daily
net assets attributable to Class A shares. The Plans for the Class A shares of
these Funds provide only for the reimbursement of actual expenses.
30
<PAGE>
For the period ended March 31, 1999, the Funds' Distributor received the
following fees for distribution-related services, as set forth below under each
such Fund's Plan:
<TABLE>
<CAPTION>
Printing &
Mailing Marketing Compensation
Fund Total Prospectus Brochures to Dealers
---- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Asset Allocation
Class A $ 110,385 $23,849 $86,636 N/A
Class B $2,368,986 N/A N/A $2,368,986
Class C $ 31,426 N/A N/A $ 31,426
U.S. Government Allocation
Class A $ 34,581 $29,868 $ 4,713 N/A
Class B $ 119,087 N/A N/A $ 119,087
Index Allocation
Class A $ 742,568 $13,910 $ 465 $ 728,193
Class B $ 60,525 N/A N/A $ 60,525
Class C $ 450,083 N/A N/A $ 450,083
</TABLE>
For the periods indicated above, Wells Fargo Securities Inc. ("WFSI"), an
affiliated broker-dealer of the Company, and its registered representatives
received compensation from the Funds under the Distribution Plans as follows:
Asset Allocation Fund, $901,329; Index Allocation Fund, $143,508; and U.S.
Government Allocation Fund, $45,301.
General. Each Plan will continue in effect from year to year if such
-------
continuance is approved by a majority vote of both the Directors of the Company
and the Non-Interested Directors. Any Distribution Agreement related to the
Plans also must be approved by such vote of the Directors and the Non-Interested
Directors. Such Agreement will terminate automatically if assigned, and may be
terminated at any time, without payment of any penalty, by a vote of a majority
of outstanding voting securities of the relevant class of the Fund or by vote of
a majority of the Non-Interested Directors on not more than 60 days' written
notice. The Plans may not be amended to increase materially the amounts payable
thereunder without the approval of a majority of the outstanding voting
securities of the Funds, and no material amendment to the Plans may be made
except by a majority of both the Directors of the Company and the Non-Interested
Directors.
The Plans require that the Treasurer of the Company shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Plans. The Rule also
requires that the selection and nomination of Directors who are not "interested
persons" of the Company be made by such disinterested Directors.
31
<PAGE>
Wells Fargo Bank, an interested person (as that term is defined in Section
2(a)(19) of the 1940 Act) of the Company, acts as a selling agent for the Funds'
shares pursuant to selling agreements with Stephens authorized under the Plans.
As a selling agent, Wells Fargo Bank has an indirect financial interest in the
operation of the Plans. The Board of Directors has concluded that the Plans are
reasonably likely to benefit the Funds and their shareholders because the Plans
authorize the relationships with selling agents, including Wells Fargo Bank,
that have previously developed distribution channels and relationships with the
retail customers that the Funds are designed to serve. These relationships and
distribution channels are believed by the Board to provide potential for
increased Fund assets and ultimately corresponding economic efficiencies (i.e.,
lower per-share transaction costs and fixed expenses) that are generated by
increased assets under management.
ADMINISTRATIVE SERVICING AGENT. The Index Allocation Fund has adopted a
------------------------------
Shareholder Administrative Servicing Plan (the "Administrative Servicing Plan")
on behalf of its Class A shares. Pursuant to the Administrative Servicing Plan,
the Fund may enter into Administrative Servicing Agreements with administrative
servicing agents (broker/dealers, banks and other financial institutions, which
may include Wells Fargo Bank and its affiliates) who are dealers/holders of
record, or that otherwise have a servicing relationship with the beneficial
owners, of the Fund's Class A shares. Administrative servicing agents agree to
perform shareholder administrative and liaison services which may include, among
other things, maintaining an omnibus account with the Fund, aggregating and
transmitting purchase, exchange and redemption orders from its customers,
answering customer inquiries regarding a shareholder's accounts in the Fund, and
providing such other services as the Company or a customer may reasonably
request. Administrative servicing agents are entitled to a fee which will not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Class A shares represented by the shares owned of record or beneficially by the
customers of the administrative servicing agent during the period for which
payment is being made. In no case shall shares be sold pursuant to the Class A
distribution plan while being sold pursuant to its Administrative Servicing
Plan.
For the eleven month period ended February 28, 1999, the Index Allocation
Fund paid to Wells Fargo Bank or its affiliates $207,827 in administrative
servicing fees, after waivers.
The Administrative Servicing Plan will continue in effect from year to year
if such continuance is approved from year to year if such continuance is
approved by a majority vote of the Directors of the Company. Any form of
Servicing Agreement related to the plans also must be approved by such vote of
the Directors. Servicing Agreements will terminate automatically if assigned,
and may be terminated at any time, without payment of any penalty, by a vote of
a majority of the outstanding shares of the Class A shares of the fund. The
Administrative Servicing Plans may not be amended to increase materially the
amount payable thereunder without the approval of a majority of the outstanding
shares of the Class A shares of the Fund, and no other material amendment to the
Plan or related Administrative Servicing Agreements may be made except by a
majority of the Directors.
32
<PAGE>
The Administrative Servicing Plan requires that the Administrator shall
provide to the Directors, and the Directors shall review, at least quarterly, a
written report of the amounts expended (and purposes therefor) under the Plan.
SHAREHOLDER SERVICING AGENT. The Funds have approved a Shareholder
---------------------------
Servicing Plan and have entered into related shareholder servicing agreements
with financial institutions, including Wells Fargo Bank on behalf of each class
of shares, with the exception of Class A of the Index Allocation Fund which has
an Administrative Servicing Plan and Agreement. Under the agreements,
Shareholder Servicing Agents (including Wells Fargo Bank) agree to perform, as
agents for their customers, administrative services, with respect to Fund
shares, which include aggregating and transmitting shareholder orders for
purchases, exchanges and redemptions; maintaining shareholder accounts and
records; and providing such other related services as the Company to a
shareholder may reasonably request. For providing shareholder services, a
Servicing Agent is entitled to a fee from the applicable Fund, on an annualized
basis, of the average daily net assets of the class of shares owned of record or
beneficially by the customers of the Servicing Agent during the period for which
payment is being made. The amounts payable under the Shareholder Servicing Plan
are shown below. The Servicing Plans and related forms of shareholder servicing
agreement were approved by the Company's Board of Directors and provide that a
Fund shall not be obligated to make any payments under such Plan or related
Agreements that exceed the maximum amounts payable under the Conduct Rules of
the NASD.
Fund Fee
---- ---
Asset Allocation
Class A 0.30%
Class B 0.30%
Class C 0.25%
U.S. Government Allocation
Class A 0.30%
Class B 0.30%
Index Allocation
Class B 0.25%
Class C 0.25%
For the period indicated below, the dollar amounts of shareholder servicing
fees (after waivers) paid by the Funds to Wells Fargo Bank or its affiliates
were as follows:
33
<PAGE>
<TABLE>
<CAPTION>
Eleven Six-Month Nine-Month
Months Ended Year Ended Period Ended Period Ended
Fund 2/28/99 3/31/98 3/31/97 9/30/96
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Asset Allocation - Class A $3,612,860 $3,523,348 $1,648,234 $2,464,701
Asset Allocation - Class B $ 908,653 $ 492,801 $ 118,374 $ 109,487
Asset Allocation - Class C $ 8,082 N/A N/A N/A
Index Allocation - Class C/1/ $ 135,122 $ 30,615 $ 86,268 N/A
Index Allocation - Class A $ 0 $ 0 N/A N/A
Index Allocation - Class B $ 17,207 $ 1,066 $ 22/2/ N/A
U.S. Government Allocation - Class A $ 214,449 $ 252,309 $ 76,579 $ 310,872
U.S. Government Allocation - Class B $ 46,251 $ 28,412 $ 5,608 $ 12,608
</TABLE>
____________________
/1/ Prior to December 12, 1997, these amounts reflect fees paid by the Class D
shares of the Overland predecessor portfolio.
/2/ This reflects the amount paid 12/14/97-12/31/97.
General. The Servicing Plan will continue in effect from year to year if
-------
such continuance is approved by a majority vote of the Directors of the Company,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Funds ("Non-Interested Directors"). Any form of
Servicing Agreement related to the Servicing Plan also must be approved by such
vote of the Directors and Non-Interested Directors. Servicing Agreements may be
terminated at any time, without payment of any penalty, by vote of a majority of
the Board of Directors, including a majority of the Non-Interested Directors.
No material amendment to the Servicing Plan or related Servicing Agreements may
be made except by a majority of both the Directors of the Company and the Non-
Interested Directors.
The Servicing Plan requires that the Administrator shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the Servicing Plan.
CUSTODIAN. Barclays Global Investors, N.A. ("BGI") acts as Custodian for
---------
each Fund. The Custodian, among other things, maintains a custody account or
accounts in the name of each Fund; receives and delivers all assets for each
Fund upon purchase and upon sale or maturity; collects and receives all income
and other payments and distributions on account of the assets of each Fund and
pays all expenses of each Fund. For its services as Custodian, BGI is not
entitled to receive compensation so long as its subsidiary, BGFA, is entitled to
receive fees for providing investment advisory services to the Fund. Prior to
the Consolidation, Wells Fargo Bank served as Custodian to the predecessor
portfolio.
For the period ended February 28, 1999, the Funds did not pay any custody
fees.
34
<PAGE>
FUND ACCOUNTANT. Wells Fargo Bank acts as Fund Accountant for each Fund.
---------------
The Fund Accountant, among other things, computes net asset values on a daily
basis, and performance calculations on a regular basis and as requested by the
Funds. For providing such services, Wells Fargo Bank will be entitled to
receive from each Fund a monthly base fee of $2,000, plus a fee equal to an
annual rate of 0.070% of the first $50,000,000 of the Fund's average daily net
assets, 0.045% of the next $50,000,000, and 0.020% of the average daily net
assets in excess of $100,000,000.
For the periods indicated below, the Funds paid Wells Fargo Bank the
following dollar amounts:
<TABLE>
<CAPTION>
Eleven
Months Ended Year-Ended
Fund 2/28/99 3/31/98/1/
---- ------- ----------
<S> <C> <C>
Asset Allocation Fund $358,355 $103,995
U.S. Government Allocation Fund $ 72,504 $ 23,326
Index Allocation Fund $ 85,027 $ 21,910
</TABLE>
______________________
/1/ Index Allocation Fund is for the 3-month period ended 3/31/98.
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank acts as Transfer
--------------------------------------
and Dividend Disbursing Agent for the Funds. For providing such services, Wells
Fargo Bank is entitled to receive monthly payments at the annual rate of 0.14%
of each Fund's average daily net assets of each Class of shares. Under the
prior transfer agency agreement, Wells Fargo Bank was entitled to receive a per
account fee plus transaction fees and out-of-pocket related costs with a minimum
of $3,000 per month per Fund, unless net assets of a Fund were under $20
million. For as long as a Fund's assets remained under $20 million, the Fund
was not charged any transfer agency fees.
For the periods indicated below, the Asset Allocation and U.S. Government
Allocation Funds paid to Wells Fargo Bank the following dollar amounts in
transfer and dividend disbursing agency fees, after waivers:
<TABLE>
<CAPTION>
Eleven
Months Ended Year-Ended
Fund 2/28/99 3/31/98
---- ------- -------
<S> <C> <C>
Asset Allocation Fund $2,114,566 $1,874,203
U.S. Government Allocation Fund $ 121,661 $ 131,004
</TABLE>
For the periods indicated below, the Index Allocation paid the following
dollar amounts in transfer and dividend disbursing agency fees, after waivers:
<TABLE>
<CAPTION>
Eleven Three-Month
Months Ended Period Ended Year-Ended
Fund 2/28/99 3/31/98 12/31/97
---- ------- ------- --------
<S> <C> <C> <C>
Index Allocation Fund/1/ $201,687 $ 30,615 $ 115,747
</TABLE>
35
<PAGE>
____________________
/1/ Prior to December 12, 1997, these amounts reflect fees paid by the Overland
predecessor portfolio.
UNDERWRITING COMMISSIONS. For the year ended March 31, 1998, the aggregate
------------------------
dollar amount of underwriting commissions paid to Stephens on sales/redemptions
of the Company's shares was $7,671,295. Stephens retained $939,892 of such
commissions. WFSI, an affiliated broker-dealer of the Company retained
$5,348,626.
For the six-month period ended March 31, 1997, the aggregate dollar amount
of underwriting commissions paid to Stephens on sales/redemptions of the
Company's shares was $2,296,243. Stephens retained $241,806 of such
commissions. WFSI and its registered representatives received $1,719,000 and
$335,437, respectively, of such commissions.
For the nine-month period ended September 30, 1996, the aggregate amount of
underwriting commissions paid to Stephens on sales/redemptions of the Company's
shares was $2,917,738. Stephens retained $198,664 of such commissions. WFSI
and its registered representatives received $2,583,027 and $136,047,
respectively, of such commissions.
For the year ended December 31, 1995, the aggregate amount of underwriting
commissions paid to Stephens on sales/redemptions of the Company's shares was
$1,251,311. Stephens retained $162,660 of such commissions. WFSI and its
registered representatives received $399,809 of such commissions.
PERFORMANCE CALCULATIONS
The Funds may advertise certain yield and total return information.
Quotations of yield and total return reflect only the performance of a
hypothetical investment in a Fund or class of shares during the particular time
period shown. Yield and total return vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
In connection with communicating its performance to current or prospective
shareholders, these figures may also be compared to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Performance information for a Fund or Class of shares in a Fund may be
useful in reviewing the performance of such Fund or Class of shares and for
providing a basis for comparison with investment alternatives. The yield of a
Fund and the yield of a Class of shares in a Fund, however, may not be
comparable to the yields from investment
36
<PAGE>
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
Performance information may be advertised for non-standardized periods,
including year-to-date and other periods less than a year.
Performance shown or advertised for Class A shares of the Stagecoach Asset
Allocation Fund for periods prior to January 2, 1992, reflects performance of
the shares of the Asset Allocation Fund for the Wells Fargo Investment Trust for
Retirement Programs, a predecessor portfolio with the same investment objective
and policies as the Stagecoach Asset Allocation Fund. Performance shown or
advertised for Class B shares of the Stagecoach Fund for the period from January
2, 1992 to January 1, 1995, reflects performance of the Class A shares of the
Stagecoach Fund, adjusted to reflect Class B expenses and sales charges. For
periods prior to January 2, 1992, Class B share performance reflects performance
of the predecessor portfolio, adjusted to reflect Class B expenses and sales
charges. Performance shown or advertised for Class C shares of the Fund for the
period prior to April 1, 1998, reflects performance of the Class A shares of the
Fund, adjusted to reflect Class C expenses and sales charges. For periods prior
to January 2, 1992, Class C share performance reflects performance of the
predecessor portfolio, adjusted to reflect Class C expenses and sales charges.
Performance shown or advertised for the Class A shares of the Stagecoach
Index Allocation Fund, reflects performance of the Class A shares of the
Overland Express Index Allocation Fund (the accounting survivor of a merger of
the Funds on December 12, 1997). Performance shown or advertised for the Class
C shares of the Stagecoach Fund reflects performance of the Class D shares of
the Overland Fund; for periods prior to July 1, 1993, Class C share performance
of the Stagecoach Fund reflects performance of the Class A shares of the
Overland Fund adjusted to reflect the sales charges and expenses of the Class C
shares. Performance shown or advertised for the Class B shares of the
Stagecoach Fund reflects performance of the Class D shares of the Overland Fund;
for periods prior to July 1, 1993, Class B share performance of the Stagecoach
Fund reflects performance of the Class A shares of the Overland Fund adjusted to
reflect sales charges and expenses of the Class B shares.
Performance shown or advertised for the Class A shares of the Stagecoach
U.S. Government Allocation Fund for periods prior to January 2, 1992, reflects
performance of the shares of the Fixed Income Strategy Fund of the Wells Fargo
Investment Trust for Retirement Programs, a predecessor portfolio with the same
investment objective and policies as the Stagecoach Fund. Performance shown or
advertised for Class B shares of the Stagecoach Fund for the period from January
2, 1992 to January 1, 1995, reflects performance of the Class A shares of the
Stagecoach Fund, adjusted to reflect Class B expenses and sales charges. For
periods prior to January 2, 1992, performance shown or advertised for Class B
shares of the Stagecoach Fund, reflects performance of the predecessor
portfolio, adjusted to reflect Class B expenses and sales charges.
37
<PAGE>
AVERAGE ANNUAL TOTAL RETURN: Each Fund may advertise certain total return
----------------------------
information. As and to the extent required by the SEC, an average annual
compound rate of return ("T") will be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment in
shares of the Fund ("P") over a period of years ("n") according to the following
formula: P(1+T)/n/= ERV.
Average Annual Total Return for the Applicable Period Ended February 28,
------------------------------------------------------------------------
1999/1/
--------
<TABLE>
<CAPTION>
Ten Ten Five Five Three Three One One
Inception/1/ Inception Year Year Year Year Year Year Year Year
With No With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge/2/ Charge Charge Charge Charge Charge Charge Charge Charge Charge
---- --------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation
Class A 12.90% 13.32% 13.82% 14.34% 15.47% 15.64% 17.20% 19.01% 12.54% 17.84%
Class B 12.66% 12.66% 13.73% 13.73% 15.66% 15.85% 17.61% 18.33% 11.99% 16.99%
Class C 12.66% 12.66% 13.73% 13.73% 15.85% 15.85% 18.33% 18.33% 15.98% 16.98%
Index Allocation
Class A 14.30% 14.78% 15.02% 15.55% 18.93% 20.02% 19.77% 21.62% 12.74% 18.06%
Class B 13.99% 13.99% 14.76% 14.76% 18.93% 19.13% 19.93% 20.63% 12.26% 17.26%
Class C 13.99% 13.99% 14.77% 14.77% 19.14% 19.14% 20.66% 20.66% 16.25% 17.25%
U.S. Government
Allocation
Class A 7.17% 7.58% 7.49% 7.98% 3.88% 4.84% 3.80% 5.41% -0.63% 4.04%
Class B 6.97% 6.97% 7.38% 7.38% 3.93% 4.18% 3.76% 4.68% -1.72% 3.27%
</TABLE>
____________________
/1/ Return calculations reflect the inclusion of front-end sales charges
for Class A shares and the maximum applicable contingent deferred
sales charge for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of
each Fund is as follows: Asset Allocation - 11/13/86; U.S. Government
Allocation -3/31/87; Index Allocation - 4/7/88.
CUMULATIVE TOTAL RETURN: In addition to the above performance information, the
- ------------------------
Funds may advertise the cumulative total return for one-month, three-month, six-
month and year-to-date periods. The cumulative total return for such periods is
based on the overall percentage change in value of a hypothetical investment in
the Fund, assuming all Fund dividends and capital gain distributions are
reinvested, without reflecting the effect of any sales charge that would be paid
by an investor, and is not annualized.
38
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return for the Applicable Period Ended February 28, 1999/1/
----------------------------------------------------------------------------
Inception Inception Ten Year Ten Year Five Year Five Year Three Year Three Year
With No With No With No With No
Sales Sales Sales Sales Sales Sales Sales Sales
Fund Charge/2/ Charge Charge Charge Charge Charge Charge Charge
---- --------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset
Allocation
Class A 344.25% 365.13% 264.81% 281.88% 105.31% 114.95% 60.98% 68.57%
Class B 334.89% 334.89% 262.11% 262.11% 106.94% 108.67% 62.69% 65.69%
Class C 334.84% 334.84% 262.07% 262.07% 108.65% 108.65% 65.67% 65.67%
Index
Allocation
Class A 330.04% 350.25% 305.21% 324.47% 137.92% 149.08% 71.82% 79.88%
Class B 317.43% 317.43% 296.22% 296.22% 138.89% 139.89% 72.51% 75.51%
Class C 317.76% 317.76% 296.53% 296.53% 140.08% 140.08% 75.65% 75.65%
U.S.
Government
Allocation
Class A 128.25% 138.98% 105.84% 115.49% 20.95% 26.66% 11.83% 17.14%
Class B 123.27% 123.27% 103.90% 103.90% 21.23% 22.72% 11.70% 14.70%
</TABLE>
____________________
/1/ Return calculations reflect the inclusion of front-end sales charges for
Class A shares and the maximum applicable contingent deferred sales charge
for Class B and Class C shares.
/2/ For purposes of showing performance information, the inception date of each
Fund is as follows: Asset Allocation - 11/13/86; U.S. Government
Allocation -3/31/87; Index Allocation - 4/7/88.
YIELD CALCULATIONS: The Funds may, from time to time, include their yields
------------------
and effective yields in advertisements or reports to shareholders or prospective
investors. Quotations of yield for the Funds are based on the investment income
per share earned during a particular seven-day or thirty-day period, less
expenses accrued during a period ("net investment income") and are computed by
dividing net investment income by the offering price per share on the last date
of the period, according to the following formula:
YIELD = 2[(a - b + 1)/6/ -1]
-----
Cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
EFFECTIVE YIELD: Effective yields for the Funds are based on the change in
---------------
the value of a hypothetical investment (exclusive of capital changes) over a
particular thirty-
39
<PAGE>
day period, less a pro-rata share of each Fund's expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return is
then annualized multiplying by 365/30, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective yield" for the
Funds assumes that all dividends received during the period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
Effective Thirty-Day Yield = [(Base Period Return +1)365/30]-1
Yield for the period ended February 28, 1999/1/
-----------------------------------------------
Fund Thirty Day Yield
---- ----------------
Asset Allocation 0.17%
Class A N/A
Class B N/A
Class C
Index Allocation
Class A 0
Class B 0
Class C N/A
U.S. Government Allocation
Class A 3.38%
Class B 2.82%
______________________
/1/ This figure reflects the maximum front-end sales load of 4.50% and the
maximum applicable Contingent Deferred Sales Charge ("CDSC").
The yield on each Class of the U.S. Government Allocation Fund will
fluctuate from time to time, unlike bank deposits or other investments that pay
a fixed yield for a stated period of time, and does not provide a basis for
determining future yields since it is based on historical data. Yield is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.
In addition, investors should recognize that changes in the net asset
values of shares of each Class of the U.S. Government Allocation Fund will
affect the yield of each such Class for any specified period, and such changes
should be considered together with the yield of each Class in ascertaining the
total return for the period to shareholders of each Fund. Yield information for
the Fund or each Class of shares of the Fund, as the case may be, may be useful
in reviewing the performance of such Fund and for providing a basis for
comparison with investment alternatives. The yield of the Fund or each Class
40
<PAGE>
of a Fund, however, may not be comparable to the yields from investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate yield.
From time to time and only to the extent the comparison is appropriate for
a Fund or Class of shares, the Company may quote the performance or price-
earning ratio of a Fund or Class in advertising and other types of literature as
compared to the performance of the S&P Index, the Dow Jones Industrial Average,
the Lehman Brothers 20+ Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), other managed or unmanaged indices or
performance data of bonds, municipal securities, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of a Fund or Class of shares, as appropriate, also may be compared to those of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
Funds' performance will be calculated by relating net asset value per share at
the beginning of a stated period to the net asset value of the investment,
assuming reinvestment of all gains, distributions and dividends paid, at the end
of the period. The Funds' comparative performance will be based on a comparison
of yields, as described above, or total return, as reported by Lipper, Survey
Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare the
past performance of a Fund or Class of shares with that of its competitors. Of
course, past performance cannot be a guarantee of future results. The Company
also may include, from time to time, a reference to certain marketing approaches
of the Distributor, including, for example, a reference to a potential
shareholder being contacted by a selected broker or dealer. General mutual fund
statistics provided by the Investment Company Institute may also be used.
The Company also may use the following information in advertisements and
other types of literature, only to the extent the information is appropriate for
a Fund: (i) the Consumer Price Index may be used to assess the real rate of
return from an investment in a Fund; (ii) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of a Fund or the general
41
<PAGE>
economic, business, investment, or financial environment in which a Fund
operates; (iii) the effect of tax-deferred compounding on the investment returns
of a Fund or a Class of shares, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a Fund or Class of shares (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis; and (iv) the sectors or industries in which a Fund invests may be
compared to relevant indices of stocks or surveys (e.g., S&P Industry Surveys)
to evaluate a Fund's historical performance or current or potential value with
respect to the particular industry or sector.
The Company also may use, in advertisements and other types of literature,
information and statements: (1) showing that bank savings accounts offer a
guaranteed return of principal and a fixed rate of interest, but no opportunity
for capital growth; and (2) describing Wells Fargo Bank, and its affiliates and
predecessors, as one of the first investment managers to advise investment
accounts using asset allocation and index strategies. The Company also may
include in advertising and other types of literature information and other data
from reports and studies prepared by the Tax Foundation, including information
regarding federal and state tax levels and the related "Tax Freedom Day."
From time to time, the Company also may include in advertisements or other
marketing materials a discussion of certain of the objectives of the investment
strategy of the Funds and a comparison of this strategy with other investment
strategies. In particular, the responsiveness of these Funds as to changing
market conditions may be discussed. For example, the Company may describe the
benefits derived by having Wells Fargo Bank monitor and reallocate investments
among the asset categories described in the Prospectus of each Fund and Fund.
The Company's advertising or other marketing material also might set forth
illustrations depicting examples of recommended allocations in different market
conditions. It may state, for example, that when the model indicates that stocks
represent a better value than bonds or money market instruments, the Asset
Allocation Fund or Index Allocation Fund might consist of 70% stocks, 25% bonds
and 5% money market instruments and that when the model indicates that bonds
represent a better value than stocks or money market instruments, the balance of
assets might shift to 60% bonds, 20% stocks and 20% money market instruments.
The Company also may discuss in advertising and other types of literature
that a Fund has been assigned a rating by a Nationally Recognized Statistical
Ratings Organization ("NRSRO"), such as Standard & Poor's Corporation. Such
rating would assess the creditworthiness of the investments held by the Fund.
The assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information relating
to the Fund or its investments. The Company may compare a Fund's
42
<PAGE>
performance with other investments which are assigned ratings by NRSROs. Any
such comparisons may be useful to investors who wish to compare the Fund's past
performance with other rated investments.
From time to time, the Funds may use the following statements, or
variations thereof, in advertisements and other promotional materials: "Wells
Fargo Bank, as a Shareholder Servicing Agent for the Stagecoach Funds, provides
various services to its customers that are also shareholders of the Funds.
These services may include access to Stagecoach Funds' account information
through Automated Teller Machines ("ATMs"), the placement of purchase and
redemption requests for shares of the Funds through ATMs and the availability of
combined Wells Fargo Bank and Stagecoach Funds account statements."
The Company also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management (formerly
Wells Fargo Investment Management), a division of Wells Fargo Bank, is listed in
the top 100 by Institutional Investor magazine in its July 1997 survey
"America's Top 300 Money Managers." This survey ranks money managers in several
asset categories. The Company may also disclose in advertising and other types
of sales literature the assets and categories of assets under management by its
investment advisor or sub-advisor and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of December 31, 1997, Wells Fargo Bank
and its affiliates provided investment advisory services for approximately $62
billion of assets of individuals, trusts, estates and institutions and $23
billion of mutual fund assets.
The Company also may disclose in sales literature the distribution rate on
the shares of each class of the Asset Allocation or U.S. Government Allocation
Funds. The distribution rate, which may be annualized, is the amount determined
by dividing the dollar amount per share of the most recent dividend by the most
recent net asset value ("NAV") or maximum offering price per share as of a date
specified in the sales literature. The distribution rate will be accompanied by
the standard 30-day yield as required by the SEC.
The Company also may discuss in advertising and other types of literature
the features, terms and conditions of Wells Fargo Bank accounts through which
investments in the Funds may be made via a "sweep" arrangement, including,
without limitation, the Managed Sweep Account, Money Market Checking Account,
California Tax-Free Money Market Checking Account, Money Market Access Account
and California Tax-Free Money Market Access Account (collectively, the "Sweep
Accounts"). Such advertisements and other literature may include, without
limitation, discussions of such terms and conditions as the minimum deposit
required to open a Sweep Account, a description of the yield earned on shares of
the Funds through a Sweep Account, a description of any monthly or other service
charge on a Sweep Account and any minimum required balance to waive such service
charges, any overdraft protection plan offered in connection with a Sweep
Account, a description of any ATM or check
43
<PAGE>
privileges offered in connection with a Sweep Account and any other terms,
conditions, features or plans offered in connection with a Sweep Account. Such
advertising or other literature may also include a discussion of the advantages
of establishing and maintaining a Sweep Account, and may include statements from
customers as to the reasons why such customers have established and maintained a
Sweep Account.
The Company may disclose in advertising and other types of literature that
investors can open and maintain Sweep Accounts over the Internet or through
other electronic channels (collectively, "Electronic Channels"). Such
advertising and other literature may discuss the investment options available to
investors, including the types of accounts and any applicable fees. Such
advertising and other literature may disclose that Wells Fargo Bank is the first
major bank to offer an on-line application for a mutual fund account that can be
filled out completely through Electronic Channels. Advertising and other
literature may disclose that Wells Fargo Bank may maintain Web sites, pages or
other information sites accessible through Electronic Channels (an "Information
Site") and may describe the contents and features of the Information Site and
instruct investors on how to access the Information Site and open a Sweep
Account. Advertising and other literature may also disclose the procedures
employed by Wells Fargo Bank to secure information provided by investors,
including disclosure and discussion of the tools and services for accessing
Electronic Channels. Such advertising or other literature may include
discussions of the advantages of establishing and maintaining a Sweep Account
through Electronic Channels and testimonials from Wells Fargo Bank customers or
employees and may also include descriptions of locations where product
demonstrations may occur. The Company may also disclose the ranking of Wells
Fargo Bank as one of the largest money managers in the United States.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each class of the Funds is determined as of
the close of regular trading (currently 1:00 p.m., Pacific time) on each day the
New York Stock Exchange ("NYSE") is open for business. Expenses and fees,
including advisory fees, are accrued daily and are taken into account for the
purpose of determining the net asset value of the Funds' shares.
Securities of a Fund for which market quotations are available are valued
at latest prices. Any security for which the primary market is an exchange is
valued at the last sale price on such exchange on the day of valuation or, if
there was no sale on such day, the latest bid price quoted on such day. In the
case of other securities, including U.S. Government securities but excluding
money market instruments maturing in 60 days or less, the valuations are based
on latest quoted bid prices. Money market instruments and debt securities
maturing in 60 days or less are valued at amortized cost. The assets of a Fund,
other than money market instruments or debt securities maturing in 60 days or
less, are valued at latest quoted bid prices. Futures contracts will be marked
to market daily at their respective settlement prices determined by the relevant
exchange. Prices may be furnished
44
<PAGE>
by a reputable independent pricing service approved by the Company's Board of
Directors. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. All other securities and other assets of
a Fund for which current market quotations are not readily available are valued
at fair value as determined in good faith by the Company's Board of Directors
and in accordance with procedures adopted by the Directors.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds may be purchased on any day the Funds are open for
business. The Funds are open for business each day the NYSE is open for trading
(a "Business Day"). Currently, the NYSE is closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day (each a "Holiday"). When any
Holiday falls on a weekend, the NYSE typically is closed on the weekday
immediately before or after such Holiday.
Payment for shares may, in the discretion of the advisor, be made in the
form of securities that are permissible investments for the Funds. For further
information about this form of payment please contact Stephens. In connection
with an in-kind securities payment, the Funds will require, among other things,
that the securities be valued on the day of purchase in accordance with the
pricing methods used by a Fund and that such Fund receives satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other matters relating to the securities.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit. The Company may also redeem shares involuntarily or make
payment for redemption in securities or other property if it appears appropriate
to do so in light of the Company's responsibilities under the 1940 Act. In
addition, the Company may redeem shares involuntarily to reimburse the Fund for
any losses sustained by reason of the failure of a shareholder to make full
payment for shares purchased or to collect any charge relating to a transaction
effected for the benefit of a shareholder which is applicable to shares of the
Fund as provided from time to time in the Prospectus.
Investors in Norwest Advantage Funds. Class A shareholders of the Norwest
------------------------------------
Advantage Funds who redeem shares at net asset value may use the redemption
proceeds
45
<PAGE>
to purchase Class A shares of the Stagecoach Funds at net asset value (without a
sales charge). A reciprocal sales load waiver is available to the Class A
shareholders of Stagecoach Funds, who may use redemption proceeds to purchase
Class A shares of the Norwest Advantage Funds at net asset value.
PORTFOLIO TRANSACTIONS
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, Wells Fargo Bank is responsible
for each Fund's portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Company to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While Wells Fargo Bank generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of non-equity securities usually will be principal
transactions. Portfolio securities normally will be purchased or sold from or
to dealers serving as market makers for the securities at a net price. Each of
the Funds also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, municipal
obligations and taxable money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of executing a Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. Under the Act, persons affiliated with the Company
are prohibited from dealing with the Company as a principal in the purchase and
sale of securities unless an exemptive order allowing such transactions is
obtained from the SEC or an exemption is otherwise available. The Funds may
purchase securities from underwriting syndicates of which Stephens or Wells
Fargo Bank is a member under certain conditions in accordance with the
provisions of a rule adopted under the Act and in compliance with procedures
adopted by the Board of Directors.
Wells Fargo Bank, as Investment Advisor to each of the Funds, may, in
circumstances in which two or more dealers are in a position to offer comparable
results for a Fund portfolio transaction, give preference to a dealer that has
provided statistical or other research services to Wells Fargo Bank. By
allocating transactions in this manner, Wells Fargo Bank is able to supplement
its research and analysis with the views and information of securities firms.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by Wells Fargo Bank under the Advisory Contracts, and
the expenses of Wells Fargo Bank will not necessarily be reduced as a result of
the receipt of this supplemental research information. Furthermore, research
services furnished by dealers through which Wells Fargo Bank places securities
transactions for a Fund may be used by Wells Fargo Bank in servicing its other
accounts,
46
<PAGE>
and not all of these services may be used by Wells Fargo Bank in connection with
advising the Funds.
For the fiscal year ended March 31, 1999, the Company paid $6,871,000 in
commissions to various broker/dealers in connection with such allocated
transactions.
Asset Allocation and Index Allocation Funds. Purchases and sales of equity
-------------------------------------------
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law, Stephens
or Wells Fargo Securities Inc. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
The Asset Allocation Fund will not deal with Stephens, Wells Fargo Bank or their
affiliates in any transaction in which any of them acts as principal without an
exemptive order from the Commission.
Brokerage Commissions. For the periods indicated below, the Funds paid the
---------------------
following amounts as brokerage commissions, none of which were paid to
affiliated brokers.
<TABLE>
<CAPTION>
11-Month Six-Month Nine-Month
Period Ended Year-Ended Period Ended Period Ended
Fund 2/28/99 3/31/98 3/31/97 9/30/96
- ---- ------- -------- -------- -------
<S> <C> <C> <C> <C>
Asset Allocation $43,620 $ 17,322 $ 0 $6,561
Index Allocation/*/ $11,355 $ 955 $ 1,976 N/A
U.S. Government N/A N/A $ 0 $ 0
Allocation
</TABLE>
____________________
/*/ Prior to December 12, 1997, these amounts reflect fees paid by the Overland
predecessor portfolio.
Securities of Regular Broker/Dealers. As of February 28, 1999, the
------------------------------------
U.S. Government Allocation Fund did not own securities of its "regular brokers
or dealers" or its parents, as defined in the 1940 Act. For the Asset Allocation
and Index Allocation Funds, as of February 28, 1999, the Funds owned securities
of their "regular brokers or dealers" or their parents as follows:
<TABLE>
Security Asset Allocation Index Allocation
Fund Fund
-------- ---------------- ----------------
<S> <C> <C>
Bear Stearns $780,000 $84,000
Charles Schwab $4,293,000 $502,000
J.P. Morgan $2,801,000 $333,000
Merrill Lynch $3,881,000 $457,000
Morgan Stanley/Dean Witter $7,504,000 $881,000
</TABLE>
Portfolio Turnover. The portfolio turnover rate is not a limiting factor
------------------
when Wells Fargo Bank deems portfolio changes appropriate. Changes may be made
in the portfolios consistent with the investment objectives and policies of the
Funds whenever such changes
47
<PAGE>
are believed to be in the best interests of the Funds and their shareholders.
The portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude all securities having a maturity when purchased of one year or less.
Portfolio turnover generally involves some expenses to the Funds, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and the reinvestment in other securities. Portfolio turnover also
can generate short-term capital gain tax consequences. Portfolio turnover rate
is not a limiting factor when Wells Fargo Bank deems portfolio changes
appropriate.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the
Funds in whole or in part. Any such waiver will reduce expenses and,
accordingly, have a favorable impact on a Fund's performance.
Except for the expenses borne by Wells Fargo Bank and Stephens, the Company
bears all costs of its operations, including the compensation of its Directors
who are not affiliated with Stephens or Wells Fargo Bank or any of their
affiliates; advisory, shareholder servicing and administration fees; payments
pursuant to any Plan; interest charges; taxes; fees and expenses of its
independent accountants, legal counsel, transfer agent and dividend disbursing
agent; expenses of redeeming shares; expenses of preparing and printing
Prospectuses (except the expense of printing and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a Plan),
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; insurance premiums and certain expenses relating to insurance
coverage; trade association membership dues; brokerage and other expenses
connected with the execution of portfolio transactions; fees and expenses of its
custodian, including those for keeping books and accounts and calculating the
NAV per share of a Fund; expenses of shareholders' meetings; expenses relating
to the issuance, registration and qualification of Fund shares; pricing
services, and any extraordinary expenses. Expenses attributable to a Fund are
charged against a Fund's assets. General expenses of the Company are allocated
among all of the funds of the Company, including a Fund, in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Company's Board of Directors deems equitable.
FEDERAL INCOME TAXES
The following information supplements and should be read in conjunction
with the Prospectus section entitled "Taxes." The Prospectuses of each Fund
describe generally the tax treatment of distributions by the Funds. This
section of the SAI includes additional information concerning federal income
taxes.
48
<PAGE>
General. The Company intends to qualify each Fund as a regulated
-------
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), as long as such qualification is in the best interest of
the Fund's shareholders. Each Fund will be treated as a separate entity for
federal income tax purposes. Thus, the provisions of the Code applicable to
regulated investment companies generally will be applied to each Fund, rather
than to the Company as a whole. In addition, net capital gains, net investment
income, and operating expenses will be determined separately for each Fund. As
a regulated investment company, each Fund will not be taxed on its net
investment income and capital gains distributed to its shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that each Fund (a) derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its holdings so that,
at the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, government securities and
other securities limited with respect to any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than U.S. Government obligations and
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses.
The Funds also must distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income (which, for this
purpose, includes net short-term capital gains) earned in each taxable year. In
general, these distributions must actually or be deemed to be made in the
taxable year. However, in certain circumstances, such distributions may be made
in the 12 months following the taxable year. Furthermore, distributions
declared in October, November or December of one taxable year and paid by
January 31 of the following taxable year will be treated as paid by December 31
of the first taxable year. The Funds intend to pay out substantially all of
their net investment income and net realized capital gains (if any) for each
year.
Excise Tax. A 4% nondeductible excise tax will be imposed on each Fund
----------
(other than to the extent of its tax-exempt interest income) to the extent it
does not meet certain minimum distribution requirements by the end of each
calendar year. Each Fund intends
49
<PAGE>
to actually or be deemed to distribute substantially all of its net investment
income and net capital gains by the end of each calendar year and, thus, expects
not to be subject to the excise tax.
Taxation of Fund Investments. Except as provided herein, gains and losses
----------------------------
on the sale of portfolio securities by a Fund will generally be capital gains
and losses. Such gains and losses will ordinarily be long-term capital gains
and losses if the securities have been held by the Fund for more than one year
at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation (including tax-
exempt obligations purchased after April 30, 1993) purchased by a Fund at a
market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Fund held the debt obligation.
If an option granted by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital losses may be deferred if they
result from a position which is part of a "straddle," discussed below. If
securities are sold by the Fund pursuant to the exercise of a call option
written by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Fund pursuant to the exercise of a put option
written by it, such Fund will subtract the premium received from its cost basis
in the securities purchased.
The amount of any gain or loss realized by a Fund on closing out a
regulated futures contract will generally result in a realized capital gain or
loss for federal income tax purposes. Regulated futures contracts held at the
end of each fiscal year will be required to be "marked to market" for federal
income tax purposes pursuant to Section 1256 of the Code. In this regard, they
will be deemed to have been sold at market value. Sixty percent (60%) of any net
gain or loss recognized on these deemed sales, and sixty percent (60%) of any
net realized gain or loss from any actual sales, will generally be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss. Transactions that qualify as designated hedges are
excepted from the "mark-to-market" rule and the "60%/40%" rule.
Under Section 988 of the Code, a Fund generally will recognize ordinary
income or loss to the extent that gain or loss realized on the disposition of
portfolio securities is attributable to changes in foreign currency exchange
rates. In addition, gain or loss realized on the disposition of a foreign
currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, will generally be treated as ordinary
income or loss. The Funds will attempt to monitor Section 988 transactions,
where applicable, to avoid adverse federal income tax impact.
50
<PAGE>
Offsetting positions held by a Fund involving certain financial forward,
futures or options contracts may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is governed
by Section 1092 of the Code which, in certain circumstances, overrides or
modifies the provisions of Section 1256. If a Fund were treated as entering
into "straddles" by engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The Fund may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any,
the results with respect to the Fund may differ. Generally, to the extent the
straddle rules apply to positions established by the Fund, losses realized by
the Fund may be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and the conversion transaction
rules, short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain may be characterized as
short-term capital gain or ordinary income.
If a Fund enters into a "constructive sale" of any appreciated position in
stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to that position. For this purpose,
a constructive sale occurs when the Fund enters into one of the following
transactions with respect to the same or substantially identical property: (i) a
short sale; (ii) an offsetting notional principal contract; or (iii) a futures
or forward contract.
If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If a Fund invests in a PFIC, the Fund intends
to make an available election to mark-to-market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the difference, if any, between the fair market value of its
interest in the PFIC shares and its basis in such shares. In some
circumstances, the recognition of loss may be suspended. The Fund will adjust
its basis in the PFIC shares by the amount of income (or loss) recognized.
Although such income (or loss) will be taxable to the Fund as ordinary income
(or loss) notwithstanding any distributions by the PFIC, the Fund will not be
subject to federal income tax or the interest charge with respect to its
interest in the PFIC under the election.
Income and dividends received by the Funds from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries.
Capital Gain Distributions. Distributions which are designated by a Fund
--------------------------
as capital gain distributions will be taxed to shareholders as long-term term
capital gain (to the extent such dividends do exceed the Fund's actual net
capital gains for the taxable year), regardless of how long a shareholder has
held Fund shares. Such distributions will
51
<PAGE>
be designated as capital gain distributions in a written notice mailed by the
Fund to its shareholders not later than 60 days after the close of the Fund's
taxable year.
Disposition of Fund Shares. A disposition of Fund shares pursuant to a
--------------------------
redemption (including a redemption in-kind) or an exchange will ordinarily
result in a taxable capital gain or loss, depending on the amount received for
the shares (or are deemed to be received in the case of an exchange) and the
cost of the shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred in acquiring the Fund's shares shall not be
taken into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations have been issued as of the date of this SAI. The loss disallowance
rules described in this paragraph do not apply to losses realized under a
periodic redemption plan.
Federal Income Tax Rates. As of the printing of this SAI, the maximum
------------------------
individual tax rate applicable to ordinary income is 39.6% (marginal tax rates
may be higher for some individuals to reduce or eliminate the benefit of
exemptions and deductions); the maximum individual marginal tax rate applicable
to net capital gain is 20%; and the maximum corporate tax rate applicable to
ordinary income and net capital gain is 35% (marginal tax rates may be higher
for some corporations to reduce or eliminate the benefit of lower marginal
income tax rates). Naturally, the amount of tax payable by an individual or
corporation will be affected by a combination of tax laws covering, for example,
deductions, credits, deferrals, exemptions, sources of income and other matters.
52
<PAGE>
Backup Withholding. The Company may be required to withhold, subject to
------------------
certain exemptions, at a rate of 31% ("backup withholding") on dividends,
capital gain distributions, and redemption proceeds (including proceeds from
exchanges and redemptions in-kind) paid or credited to an individual Fund
shareholder, if the shareholder fails to certify that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or if the IRS notifies the Company that the
shareholder's TIN is incorrect or that the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed
on the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening or
reopening an account. Failure to furnish a valid TIN to the Company could also
subject the investor to penalties imposed by the IRS.
Corporate Shareholders. Corporate shareholders of the Funds may be
----------------------
eligible for the dividends-received deduction on dividends distributed out of a
Fund's net investment income attributable to dividends received from domestic
corporations, which, if received directly by the corporate shareholder, would
qualify for such deduction. A distribution by a Fund attributable to dividends
of a domestic corporation will only qualify for the dividends-received deduction
if (i) the corporate shareholder generally holds the Fund shares upon which the
distribution is made for at least 46 days during the 90 day period beginning 45
days prior to the date upon which the shareholder becomes entitled to the
distribution; and (ii) the Fund generally holds the shares of the domestic
corporation producing the dividend income for at least 46 days during the 90 day
period beginning 45 days prior to the date upon which the Fund becomes entitled
to such dividend income.
Foreign Shareholders. Under the Code, distributions of net investment
--------------------
income by the Funds to a nonresident alien individual, foreign trust (i.e.,
trust which a U.S. court is able to exercise primary supervision over
administration of that trust and one or more U.S. persons have authority to
control substantial decisions of that trust), foreign estate (i.e., the income
of which is not subject to U.S. tax regardless of source), foreign corporation,
or foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a dividend paid by the Fund to a foreign
shareholder is "effectively connected" with a U.S. trade or business (or, if an
income tax treaty applies, is attributable to a U.S. permanent establishment of
the foreign shareholder), in which case the reporting and withholding
requirements applicable to U.S. persons will apply. Distributions of capital
gains are generally not subject to tax withholding.
New Regulations. On October 6, 1997, the Treasury Department issued new
---------------
regulations (the "New Regulations") which make certain modifications to the
backup withholding, U.S. income tax withholding and information reporting rules
applicable to foreign shareholders. The New Regulations will generally be
effective for payments made after December 31, 1999, subject to certain
transition rules. Among other things, the New Regulations will permit the Funds
to estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such
53
<PAGE>
distributions paid to foreign shareholders that will be subject to U.S. income
tax withholding. Prospective investors are urged to consult their own tax
advisors regarding the New Regulations.
Tax-Deferred Plans. The shares of the Funds are available for a variety of
------------------
tax-deferred retirement and other plans, including Individual Retirement
Accounts ("IRA"), Simplified Employee Pension Plans ("SEP-IRA"), Savings
Incentive Match Plans for Employees ("SIMPLE plans"), Roth IRAs, and Education
IRAs, which permit investors to defer some of their income from taxes.
Investors should contact their selling agents for details concerning retirement
plans.
Other Matters. Investors should be aware that the investments to be made
-------------
by the Funds may involve sophisticated tax rules that may result in income or
gain recognition by the Funds without corresponding current cash receipts.
Although the Funds will seek to avoid significant noncash income, such noncash
income could be recognized by the Funds, in which case the Funds may distribute
cash derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the federal tax considerations
generally affecting investments in the Funds. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
or foreign taxes.
CAPITAL STOCK
The Funds are three of the funds in the Stagecoach Family of Funds. The
Company was organized as a Maryland corporation on September 9, 1991, and
currently offers shares of over thirty funds.
Most of the Company's funds are authorized to issue multiple classes of
shares, one class generally subject to a front-end sales charge and, in some
cases, classes subject to a contingent-deferred sales charge, that are offered
to retail investors. Certain of the Company's funds also are authorized to
issue other classes of shares, which are sold primarily to institutional
investors. Each class of shares in a fund represents an equal, proportionate
interest in a fund with other shares of the same class. Shareholders of each
class bear their pro rata portion of the fund's operating expenses, except for
certain class-specific expenses (e.g., any state securities registration fees,
shareholder servicing fees or distribution fees that may be paid under Rule 12b-
1) that are allocated to a particular class. Please contact Investor Services
at 1-800-222-8222 if you would like additional information about other funds or
classes of shares offered.
With respect to matters affecting one class but not another, shareholders
vote as a class; for example, the approval of a Plan. Subject to the foregoing,
all shares of a Fund have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one
54
<PAGE>
series. For example, a change in a Fund's fundamental investment policy affects
only one series and would be voted upon only by shareholders of the Fund
involved. Additionally, approval of an advisory contract, since it affects only
one Fund, is a matter to be determined separately by series. Approval by the
shareholders of one Series is effective as to that Series whether or not
sufficient votes are received from the shareholders of the other Series to
approve the proposal as to those series.
As used in the Prospectus and in this SAI, the term "majority," when
referring to approvals to be obtained from shareholders of a Class of shares of
a Fund, means the vote of the lesser of (i) 67% of the shares of such class
represented at a meeting if the holders of more than 50% of the outstanding
shares of the class are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the class of the Fund. The term "majority," when
referring to approvals to be obtained from shareholders of the Fund, means the
vote of the lesser of (i) 67% of the shares of the Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Fund. The term "majority," when referring to the approvals to be
obtained from shareholders of the Company as a whole, means the vote of the
lesser of (i) 67% of the Company's shares represented at a meeting if the
holders of more than 50% of the Company's outstanding shares are present in
person or by proxy, or (ii) more than 50% of the Company's outstanding shares.
Shareholders are not entitled to any preemptive rights or subscription.
All shares, when issued, will be fully paid and non-assessable by the Company
for the consideration described in the Prospectus.
The Company may dispense with an annual meeting of shareholders in any year
in which it is not required to elect Directors under the 1940 Act.
Each share of a class of a Fund represents an equal proportional interest
in the Fund with each other share of the same class and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the Fund as are declared in the discretion of the Directors. In the event of
the liquidation or dissolution of the Company, shareholders of a Fund are
entitled to receive the assets attributable to that Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular investment portfolio that are available for distribution in such
manner and on such basis as the Directors in their sole discretion may
determine.
Set forth below as of May 28, 1999, is the name, address and share
ownership of each person known by the Company to have beneficial or record
ownership of 5% or more of a class of a Fund or 5% or more of the voting
securities of a Fund as a whole. The term "N/A" is used where a shareholder
holds 5% or more of a class, but less than 5% of a Fund as a whole.
55
<PAGE>
5% OWNERSHIP AS OF MAY 28, 1999
-------------------------------
<TABLE>
<CAPTION>
NAME AND CLASS; TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
ASSET Wells Fargo Bank Class A 65.45% 41.92%
ALLOCATION P.O. Box 63015 Beneficially Owned
San Francisco, CA
94163
HLPF&S for the Sole Benefit 21.74% .26%
of its Customers
Attn Mutual Fund Administration
4800 Deer Lake Drive East,
3rd Floor
Jacksonville, FL 32246
INDEX Merrill Lynch Pierce Class A 11.57% 6.58%
ALLOCATION Fenner & Smith, Inc. Record Holder
Record Holder for
Exclusive Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake East,
3rd Floor
Jacksonville, FL 32246
Charles Schwab & Co. Inc. 5.51% 3.14%
Special Custody
A/C for Benefit of Customers -
Reinvest
Attn Mutual Funds
101 Montgomery St
San Francisco, CA 94104
Merrill Lynch Pierce Class C 22.36% 7.90%
Fenner & Smith, Inc. Record Holder
for Exclusive
Benefit of Customers
Attn: Fund Admin.
4800 Deer Lake East,
3rd Floor
Jacksonville, FL 32246
U.S. Wells Fargo Bank Class A 46.68% 34.00%
GOVERNMENT P.O. Box 63015 Beneficially Owned
ALLOCATION San Francisco, CA 94163
Wells Fargo Bank Class A 5.71% 4.20%
Choicemaster Beneficially Owned
Attn: Mutual Fund A88-4
P.O. Box 9800
Calabasas, CA 91372-0800
</TABLE>
56
<PAGE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
OTHER
The Company's Registration Statement, including the Prospectus and SAI for
the Funds and the exhibits filed therewith, may be examined at the office of the
U.S. Securities and Exchange Commission in Washington, D.C. Statements
contained in the Prospectus or the SAI as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
COUNSEL
Morrison & Forester LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006, as counsel for the Company, has rendered its opinion as
to certain legal matters regarding the due authorization and valid issuance of
the shares of beneficial interest being sold pursuant to the Funds' Prospectus.
INDEPENDENT AUDITORS
KPMG LLP serves as the independent auditors for the Company. KPMG LLP
provides audit services, tax return preparation and assistance and consultation
in connection with review of certain SEC filings. KPMG LLP's address is Three
Embarcadero Center, San Francisco, California 94111.
FINANCIAL INFORMATION
The portfolios of investments and audited financial statements for the
Funds for the period ended February 28, 1999, are hereby incorporated by
reference to the Company's Annual Report as filed with the SEC on May 5,
1999.
Annual and Semi-Annual Reports may be obtained by calling 1-800-222-8222.
57
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds and commercial paper.
Corporate and Municipal Bonds
- -----------------------------
Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa" are
of "high quality by all standards," but margins of protection or other elements
make long-term risks appear somewhat greater than "Aaa" rated bonds. Bonds rated
"A" possess many favorable investment attributes and are considered to be upper
medium grade obligations. Bonds rated "Baa" are considered to be medium grade
obligations; interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's applies numerical modifiers in its rating
system: 1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are "AAA,"
"AA," "A" and "BBB." Bonds rated "AAA" have the "highest rating" assigned by S&P
and have "an extremely strong capacity" to pay interest and repay principal.
Bonds rated "AA" have a "very strong capacity" to pay interest and repay
principal and "differ from the highest rated obligations only in small degree."
Bonds rated "A" have a "strong capacity" to pay interest and repay principal,
but are "somewhat more susceptible" to adverse effects of changes in economic
conditions or other circumstances than bonds in higher rated categories. Bonds
rated "BBB" are regarded as having "adequate protection parameters" to pay
interest and repay principal, but changes in economic conditions or other
circumstances are more likely to lead to a "weakened capacity" to make such
repayments. The ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the category.
A-1
<PAGE>
A-2
<PAGE>
STAGECOACH FUNDS, INC.
SEC REGISTRATION NOS. 33-42927; 811-6419
PART C
OTHER INFORMATION
Item 23. Exhibits
--------
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
a(1) - Amended and Restated Articles of Incorporation dated November 22, 1995,
incorporated by reference to Post-Effective Amendment No. 17 to the Registration
Statement, filed November 29, 1995.
a(2) - Articles Supplementary, incorporated by reference to Post-Effective Amendment No. 43 to the
Registration Statement filed March 30, 1998.
b - By-Laws, incorporated by reference to Post-Effective Amendment No. 31 to the
Registration Statement, filed May 15, 1997.
c - Not Applicable
d(1) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 51 to the Registration
Statement filed March 1, 1999.
d(2) - Sub-Advisory Contract with Wells Capital Management on behalf of various Funds,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
d(3) - Sub-Advisory Contract with Barclays Global Fund Advisors on behalf of the Asset
Allocation, Equity Index, Index Allocation, and U.S. Government Allocation
Funds, incorporated by reference to Post-Effective Amendment No. 48, filed
July 31, 1998.
e(1) - Amended Distribution Agreement with Stephens Inc., incorporated by reference to
Post-Effective Amendment No. 50, filed November 30, 1998.
e(2) - Selling Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 2 to the Registration
Statement, filed April 17, 1992.
f - Not Applicable
g(1)(a) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the Asset Allocation Fund, incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement, filed April 17, 1992.
g(1)(b) - Addendum No. 1 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the Asset Allocation Fund, incorporated by reference
to Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
g(2)(a) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the U.S. Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement, filed April 17,
1992.
g(2)(b) - Addendum No. 1 to the Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
g(3)(a) - Custody Agreement with Wells Fargo Institutional Trust Company, N.A. on behalf
of the Equity Index, (formerly, Corporate Stock) Fund, incorporated by reference
to Post-Effective Amendment No. 2 to the Registration Statement, filed April 17,
1992.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
g(3)(b) - Custody Agreement with Norwest Bank Minnesota, N.A. on behalf of all Funds other than the Asset
Allocation, Index Allocation, U.S. Government Allocation, Equity Index and International Equity
Funds, filed herewith.
g(4) - Custody Agreement with Barclays Global Investors, N.A. on behalf of the Index Allocation Fund
filed herewith.
g(5) - Custody Agreement with Investors Bank and Trust Co. on behalf of the International Equity
Fund, filed herewith.
</TABLE>
C-2
<PAGE>
C-3
<PAGE>
<TABLE>
<S> <C>
h(1) - Administration Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 48 to the Registration
Statement, filed July 31, 1998.
h(2) - Agency Agreement with Wells Fargo Bank, N.A. on behalf of the Funds,
incorporated by reference to Post-Effective Amendment No. 50 to the Registration
Statement, filed November 30, 1998.
h(3) - Servicing Plan as consolidated to include all classes of the Funds, incorporated
by reference to Post-effective Amendment No. 50 to the Registration Statement,
filed November 30, 1998.
h(4) - Form of Shareholder Servicing Agreement with Wells Fargo Bank, N.A. on behalf of
the Funds, incorporated by reference to Post-Effective Amendment No. 50 to the
Registration Statement, filed November 30, 1998.
i - Opinion and Consent of Counsel, filed herewith.
j - Consent of Independent Auditors, filed herewith.
k - Not Applicable.
l - Investment letter, incorporated by reference to Item 24(b) of Pre-Effective
Amendment No. 1 to the Registration Statement, filed November 29, 1991.
m(1) - Distribution Plan on behalf of various classes and Funds, incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
filed July 31, 1998.
m(2) - Distribution Plan on behalf of the Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Income Fund, California Tax-Free Money Market
Mutual Fund, Diversified Equity Income Fund, Growth Fund, Money Market Mutual
Fund, Short-Intermediate U.S. Government Income Fund, U.S. Government Allocation
Fund and U.S. Government Income Fund, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C>
m(3) - Distribution Plan on behalf of the California Tax-Free Money Market Trust and
National Tax-Free Money Market Trust, incorporated by reference to
Post-Effective Amendment No. 48 to the Registration Statement, filed July 31,
1998.
n(1) - Schedules for Computation of Performance Data, incorporated by reference to
Post-Effective Amendment No. 15, filed May 1, 1995.
n(2) - Financial Data Schedules for the fiscal period ended February 28, 1999, for the
Allocation Funds is incorporated by reference to the Form N-SAR, filed April 28,
1999.
o - Rule 18f-3 Multi-Class Plan, as amended, incorporated by reference to
Post-Effective Amendment No. 50 to the Registration Statement, filed November 30,
1998.
</TABLE>
C-5
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of May 31, 1999 the Registrant did not directly or indirectly
control, and were not under common control with, any other person or entity.
Item 25. Indemnification
---------------
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
Officers, whether serving the Corporation or at its request any other
entity, to the full extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the full extent permitted by law,
and (2) its other employees and agents to such extent as shall be
authorized by the Board of Directors or the Corporation's By-Laws and be
permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary
to carry out these indemnification provisions and is expressly empowered
to adopt, approve and amend from time to time such By-Laws, resolutions
or contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of these Articles
of Incorporation of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein
shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or
to any holders of securities of the Corporation to which he is subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director
or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however,
that nothing herein shall be construed to protect any Director or officer
of the Corporation against any liability to which such Director or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office. No amendment, modification or repeal of this
Article VIII shall adversely affect any right or protection of a Director
or officer that exists at the time of such amendment, modification or
repeal.
Item 26. Business and Other Connections of Investment Advisor.
----------------------------------------------------
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, currently serves as investment advisor to
several of the Registrant's investment portfolios and to certain other
registered open-end management investment
C-6
<PAGE>
companies. Wells Fargo Bank's business is that of a national banking association
with respect to which it conducts a variety of commercial banking and trust
activities.
To the knowledge of Registrant, none of the directors or
executive officers of Wells Fargo Bank, except those set forth below, is or has
been at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses of
the directors and executive officers of Wells Fargo Bank who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105
Director of Armstrong World Industries, Inc.
5037 Patata Street
South Gate, CA 90280
Director of Eastman Chemical Corporation
12805 Busch Place
Santa Fe Springs, CA 90670
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
Michael R. Bowlin Chairman of the Board of Directors, Chief Executive Officer,
Director Chief Operating Officer and President of
Atlantic Richfield Co. (ARCO)
Highway 150
Santa Paula, CA 93060
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C>
Edward Carson Chairman of the Board and Chief Executive Officer of
Director First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davilla President (Emeritus) and a Director of
Director The Vons Companies, Inc.
618 Michillinda Ave.
Arcadia, CA 91007
Director of Pacific Gas & Electric Company
788 Taylorville Road
Grass Valley, CA 95949
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Company
P.O. Box 1000
Lebec, CA 93243
Director of The Bakersfield Californian
1707 I Street
P.O. Box 440
Bakersfield, CA 93302
Trustee of Whittier College
13406 East Philadelphia Ave.
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Board of Wells Fargo & Company
Directors 420 Montgomery Street
San Francisco, CA 94105
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C>
Director of Phelps Dodge Corporation
2600 North Central Ave.
Phoenix, AZ 85004
Director of Safeway, Inc.
4th and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Professor (Emeritus) of Accounting
Director Graduate School of Business at Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Bailard Biehl & Kaiser
Real Estate Investment Trust, Inc.
2755 Campus Dr.
San Mateo, CA 94403
Director of Boise Cascade Corporation
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Enron Corporation
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Director of Homestake Mining Company
650 California Street
San Francisco, CA 94108
Thomas L. Lee Chairman and Chief Executive Officer of
Director The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
</TABLE>
C-9
<PAGE>
<TABLE>
<S> <C>
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen Newman President of Ellen Newman Associates
Director 323 Geary Street
Suite 507
San Francisco, CA 94102
Chair (Emeritus) of the Board of Trustees
University of California at San Francisco Foundation
250 Executive Park Blvd.
Suite 2000
San Francisco, CA 94143
Director of the California Chamber of Commerce
1201 K Street
12th Floor
Sacremento, CA 95814
Philip J. Quigley Chairman, President and Chief Executive Officer of
Director Pacific Telesis Group
130 Kearney Street Rm. 3700
San Francisco, CA 94108
Carl E. Reichardt Director of Columbia/HCA Healthcare Corporation
Director One Park Plaza
Nashville, TN 37203
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Retired Chairman of the Board of Directors
and Chief Executive Officer of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
</TABLE>
C-10
<PAGE>
<TABLE>
<S> <C>
Donald B. Rice President and Chief Executive Officer of Teledyne, Inc.
Director 2049 Century Park East
Los Angeles, CA 90067
Retired Secretary of the Air Force
Director of Vulcan Materials Company
One MetroPlex Drive
Birmingham, AL 35209
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
Director 44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Retired Chairman of the Board and Chief Executive Officer of
Director Martin Lockheed Corp
6801 Rockledge Drive
Bethesda, MD 20817
</TABLE>
C-11
<PAGE>
<TABLE>
<S> <C>
Director of Edison International
and Southern California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of the University of California at Berkeley
Director
Director of Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
John A. Young President, Chief Executive Officer and Director
Director of Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 9434
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Director of Lucent Technologies
25 John Glenn Drive
Amherst, NY 14228
Director of Novell, Inc.
11300 West Olympic Blvd.
Los Angeles, CA 90064
Director of Shaman Pharmaceuticals Inc.
213 East Grand Ave. South
San Francisco, CA 94080
William F. Zuendt President of Wells Fargo & Company
President 420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corporation
5400 Bayfront Plaza, P.O. Box 58145
Santa Clara, CA 95052
Director of the California Chamber of Commerce
</TABLE>
C-12
<PAGE>
Prior to May 1, 1996, Barclays Global Fund Advisors ("BGFA"), a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI", formerly,
Wells Fargo Institutional Trust Company), served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and to certain other open-end management investment companies. From May 1, 1996
to December 15, 1997 BGFA served as sub-advisor to the corresponding Asset
Allocation, U.S. Government Allocation and Corporate Stock Master Portfolios of
Master Investment Trust, in which such funds invested substantially all of their
assets. These Funds currently invest directly in a portfolio of securities and
no longer invest in the Master Portfolios. BGFA currently serves as sub-advisor
to these Funds.
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-advisor to the Registrant, Wells Fargo Nikko
Investment Advisors ("WFNIA") and, in some cases, the service business of BGI.
To the knowledge of the Registrant, except as set forth below, none of the
directors or executive officers of BGFA is or has been at any time during the
past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------- -------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont, San Francisco, CA 94105
Patricia Dunn Director of BGFA and C-Chairman and Director of BGI
Director 45 Fremont, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA
Chairman and Director and Chief Executive Officer of BGI
45 Fremont, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997
Chief Financial Officer 45 Fremont, San Francisco, CA 94105
Managing Director and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997
505 Market Street, San Francisco, CA 94105
</TABLE>
Prior to January 1, 1996 WFNIA served as sub-advisor to the Asset
Allocation, Corporate Stock and U.S. Government Allocation Funds of the Company
and as advisor or sub-advisor to various other open-end management investment
companies.
For additional information, "Organization and Management of the
Fund(s)" in the Prospectuses for the Funds as well as "Management" in the
Statements of Additional Information of such Funds. For information as to the
business, profession, vocation or employment of a substantial nature of each of
the officers and management committees of WFNIA, reference is
C-13
<PAGE>
made to WFNIA's Form ADV and Schedules A and D filed under the Investment
Advisors Act of 1940, File No. 801-36479, incorporated herein by reference.
Item 27. Principal Underwriters.
----------------------
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment advisor for any other registered investment
companies, but does act as principal underwriter for Life & Annuity Trust,
Barclays Global Investors Funds, Inc., Stagecoach Trust, Nations Fund, Inc.,
Nations Fund Trust, Nations Fund Portfolios, Inc., Nations LifeGoal Funds, Inc.
and Nations Institutional Reserves, Nations Annuity Trust, and is the exclusive
placement agent for Nations Master Investment Trust and Master Investment
Portfolio, all of which are registered open-end management investment
companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D filed by Stephens Inc. with the Securities and Exchange Commission
pursuant to the Investment Advisors Act of 1940 (file No. 501-15510).
(c) Not applicable.
Item 28. Location of Accounts and Records.
--------------------------------
(a) The Registrant maintains accounts, books and other documents
required by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder (collectively, "Records") at the offices of Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment advisor, administrator and custodian and transfer and
dividend disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-advisor and custodian,
respectively, for the period prior to January 1, 1996, at 45 Fremont Street, San
Francisco, California 94105.
(d) BGFA and BGI maintain all Records relating to their services
as sub-advisor and custodian, respectively, for the period beginning January 1,
1996 at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sub-administrator and distributor at 111 Center Street, Little Rock, Arkansas
72201.
Item 29. Management Services.
-------------------
Other than as set forth under the captions "Organization and
Management of the Fund(s)" in the Prospectuses for the Funds as well as
"Management" in the Statements of
C-14
<PAGE>
Additional Information of such Funds, the Registrant is not a party to any
management-related service contract.
Item 30. Undertakings.
------------
Not applicable.
C-15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
on Form N-1A pursuant to rule 485(b) under the Securities Act of 1933, and has
duly caused this Amendment to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized in the City of
Little Rock, State of Arkansas on the 30th day of June, 1999.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement on Form N-1A has been signed below by
the following persons in the capacities and on the date indicated:
Signature Title Date
--------- ----- ----
* Director, Chairman and President
---------------------------
(R. Greg Feltus) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Secretary and Treasurer 6/30/99
---------------------------
(Richard H. Blank, Jr.) (Principal Financial Officer)
* Director
---------------------------
(Jack S. Euphrat)
* Director
---------------------------
(Thomas S. Goho)
* Director
---------------------------
(Peter G. Gordon)
* Director
---------------------------
(Joseph N. Hankin)
* Director
---------------------------
(W. Rodney Hughes)
* Director
---------------------------
(Tucker Morse)
*By /s/ Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
As Attorney-in-Fact
June 30, 1999
<PAGE>
STAGECOACH FUNDS, INC.
FILE NOS. 33-42927; 811-6419
EXHIBIT INDEX
Exhibit Number DESCRIPTION
EX-99.B8(c) Custody Agreement - NBM
EX-99.B8(d) Custody Agreement - BGI
EX-99.B8(e) Custody Agreement - IBT
EX-99.B10 Opinion and Consent of Counsel
EX-99.B11 Consent of Independent Auditors
1
<PAGE>
STAGECOACH FUNDS, INC.
CUSTODY AGREEMENT
AGREEMENT, dated as of June 4, 1999, between Stagecoach Funds, Inc. (the
"Company"), a corporation organized under the laws of the State of Maryland with
its principal place of business at 111 Center Street, Little Rock, Arkansas,
72201, and Norwest Bank Minnesota, N.A. (the "Custodian" or "Norwest Bank"), a
banking association organized under the laws of the United States of America
with its principal place of business at Norwest Center, Sixth and Marquette,
Minneapolis, MN 55479.
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Company desires to appoint Norwest Bank custodian of its
securities and cash and Norwest Bank is willing to act in such capacity upon the
terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings specified, insofar as the context will allow:
(a) Act: The term Act shall mean the Investment Company Act of 1940, as
---
amended from time to time.
(b) Board: The term Board shall mean the Board of Directors of the
-----
Company.
(c) Book-Entry Account: The term Book-Entry Account shall mean an
------------------
account maintained by a Federal Reserve Bank in which Book-Entry Securities are
held.
(d) Book-Entry Securities: The term Book-Entry Securities shall mean
---------------------
securities issued by the United States Treasury and United States Federal
agencies and instrumentalities that are maintained in the book-entry system
maintained by a Federal Reserve Bank.
(e) Custodian: The term Custodian shall mean Norwest Bank Minnesota,
---------
N.A., in its capacity as custodian under this Agreement.
(f) Foreign Securities: The term Foreign Securities shall mean "Foreign
------------------
Securities" as that term is defined in Rule 17f-5 under the Act.
<PAGE>
(g) Foreign Sub-Custodian: The term Foreign Sub-Custodian shall mean
---------------------
"Eligible Foreign Sub-Custodian" as that term is defined in Rule 17f-5 under the
Act.
(h) Fund Business Day: The term Fund Business Day shall mean a day that
-----------------
is a business day for a Fund as defined in the Fund's prospectus.
(i) Oral Instructions: The term Oral Instructions shall mean an
-----------------
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian in person or by telephone, vocal telegram or
other electronic means, by a person or persons reasonably believed in good faith
by the Custodian to be a person or persons authorized by a resolution of the
Board to give Oral Instructions on behalf of the Company. Each Oral Instruction
shall specify whether it is applicable to the entire Company or a specific Fund
of the Company.
(j) Securities: The term Securities shall mean bonds, debentures, notes,
----------
stocks, shares, evidences of indebtedness, and other securities and investments
from time to time owned by the Company.
(k) Securities Depository: The term Securities Depository shall mean a
---------------------
system, domestic or foreign, for the central handling of securities in which all
securities of any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of the securities and shall include any system
for the issuance of Book-Entry Securities.
(l) Funds: The term Funds shall mean the Funds listed in Appendix A or
-----
any Fund that the Company shall subsequently establish, provided that the
Custodian may decline to act as custodian for any Fund subsequently established.
(m) Share Certificates: The term Share Certificates shall mean the
------------------
certificates for the Shares.
(n) Shareholders: The term Shareholders shall mean the registered owners
------------
from time to time of the Shares, as reflected on the share registry records of
the Company.
(o) Shares: The term Shares shall mean the shares of common stock of a
------
Fund, each of which, in the case of a Fund having Series, is allocated to a
particular Series.
(p) Sub-Custodian: The term Sub-Custodian shall mean any person selected
-------------
by the Custodian under Section 20 hereof and in accordance with the requirements
of the Act to custody any or all of the Securities and cash of the Company, and
shall include Foreign Sub-Custodians.
(q) Company: The term Company shall mean Stagecoach Funds, Inc.
-------
(r) Written Instructions: The term Written Instructions shall mean an
--------------------
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to the Custodian
-2-
<PAGE>
in original writing containing original signatures, or a copy of such document
transmitted by telecopy, including transmission of such signature, or other
mechanical or documentary means, at the request of a person or persons
reasonably believed in good faith by the Custodian to be a person or persons
authorized by a resolution of the Board to give Written Instructions on behalf
of the Company. Each Written Instruction shall specify whether it is applicable
to the entire Company or a specific Fund of the Company.
(s) 1934 Act: The term 1934 Act shall mean the Securities Exchange Act
--------
of 1934, as amended from time to time.
SECTION 2. APPOINTMENT
The Company hereby appoints the Custodian as custodian of the Securities
and cash of each Fund from time to time on deposit hereunder. The Securities and
cash of the Company shall be and remain the sole property of the Company and the
Custodian shall have only custody thereof. The Custodian shall hold, earmark and
physically segregate for the appropriate Fund account of the Company all non-
cash property, including all Securities that are not maintained pursuant to
Section 6 in a Securities Depository or Book-Entry Account. The Custodian will
collect from time to time the dividends and interest of the Securities held by
the Custodian.
The Custodian shall open and maintain a separate bank or trust account
or accounts in the name of the Company, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Company. Notwithstanding the foregoing, a
separate bank account may be established by the Company to be used as a petty
cash account in accordance with Rule 17f-3 under the Act and the Custodian shall
have no duty or liability with regard to such account.
Upon receipt of Written Instructions, funds held by the Custodian for
the Company may be deposited by the Custodian to its credit in the banking
department of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
SECTION 3. DELIVERY OF BOARD RESOLUTIONS
The Company shall, as necessary, file with the Custodian a certified
copy of the operative resolution of the Board authorizing execution of Written
Instructions and the number of signatories required and setting forth authentic
signatures of all signatories authorized to sign on behalf of the Company or any
Fund thereof. Such resolution shall constitute conclusive evidence of the
authority of all signatories designated therein to act and shall be considered
in full force and effect, with the Custodian fully protected in acting in
reliance thereon, until the Custodian receives a certified copy of a replacement
resolution adding or deleting a person or persons authorized to give Written
Instructions.
-3-
<PAGE>
The Company shall, as necessary, file with the Custodian a certified
copy of the operative resolution of the Board authorizing the transmittal of
Oral Instructions and specifying the person or persons authorized to give Oral
Instructions on behalf of the Company or any Fund. Such resolution shall
constitute conclusive evidence of the authority of the person or persons
designated therein to act and shall be considered in full force and effect, with
the Custodian fully protected in acting in reliance therein, until the Custodian
actually receives a certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Oral Instructions. If the
officer certifying the resolution is authorized to give Oral Instructions, the
certification shall also be signed by a second officer of the Company.
SECTION 4. INSTRUCTIONS
For all purposes under this Agreement, the Custodian is authorized to
act upon receipt of the first of any Written or Oral Instruction it receives. If
the first Instruction is an Oral Instruction, the Company shall deliver or have
delivered to the Custodian a confirmatory Written Instruction; and if the
Custodian receives an Instruction, whether Written or Oral, with respect to a
Securities transaction, the Company shall cause the broker or dealer to send a
written confirmation of the transaction to the Custodian. The Custodian shall be
entitled to rely on the first Instruction received and, for any act or omission
undertaken in compliance therewith, shall be free of liability and fully
indemnified and held harmless by the Company. The sole obligation of the
Custodian with respect to any confirmatory Written Instruction or broker or
dealer written confirmation shall be to make reasonable efforts to detect any
discrepancy between the original Instruction and such confirmation and to report
such discrepancy to the Company. The Company shall be responsible, at the
Company's expense, for taking any action, including any reprocessing, necessary
to correct any discrepancy or error, and to the extent such action requires the
Custodian to act, the Company shall give the Custodian specific Written
Instructions as to the action required.
SECTION 5. DEPOSIT OF COMPANY ASSETS
The Company will initially transfer and deposit or cause to be
transferred and deposited with the Custodian all of the Securities, other
property and cash owned by the Company at the time this Agreement becomes
effective, provided that the Custodian shall have the right, in its sole
discretion, to refuse to accept any securities or other property that are not in
proper form for deposit or any reason. Such transfer and deposit shall be
evidenced by appropriate schedules duly executed by the Company. The Company may
deposit with the Custodian additional Securities of the Company and dividends or
interest collected on such Securities as the same are acquired from time to
time.
The Company will cause to be deposited with the Custodian from time to
time (i) the net proceeds of Securities sold, (ii) the applicable net asset
value of Shares sold, whether representing initial issue or any other securities
and (iii) cash as may be acquired. Deposits with respect to sales of Shares
shall be accompanied by Written or Oral Instructions stating the amount to be
deposited with the Custodian and registration instructions.
-4-
<PAGE>
SECTION 6. DEPOSIT OF COMPANY ASSETS WITH THIRD PARTIES
The Company hereby authorizes the Custodian to deposit assets of the
Company as follows:
(a) With the Custodian or any other bank licensed and regularly
examined by the United States or any state thereof assets held in the Option
Account created pursuant to Section 13(b).
(b) In the Custodian's or Sub-Custodian's account(s) with any
Securities Depository as the Company shall permit by Written or Oral
Instruction.
(c) Book-Entry Securities belonging to the Company in a Book-Entry
Account maintained for the Custodian.
So long as any deposit referred to in (b) or (c) above is maintained
for the Company, the Custodian shall: (i) deposit the Securities in an account
that includes only assets held by the Custodian for customers; (ii) send the
Company a confirmation (i.e., an advice of notice of transaction) of any
transfers of the Company to or from the account; (iii) with respect to
Securities of the Company transferred to the account, identify as belonging to
the Company a quantity of securities in a fungible bulk of securities that are
registered in the name of the Custodian or its nominee, or credited to the
Custodian's account on the books of a Securities Depository or the Custodian's
agent; (iv) promptly send to the Company all reports it receives from the
appropriate Federal Reserve Bank or Securities Depository on its respective
system of internal accounting control; and (v) send to the Company such reports
of the systems of internal accounting control of the Custodian and its agents
through which Securities are deposited as are available and as the Company may
reasonably request from time to time.
The Custodian shall be liable to the Company for any loss or damage to
the Company resulting from the negligence (including failure to act), fault or
willful misconduct of the Custodian, its agents or employees in selecting a
Securities Depository or Book-Entry Account. The Custodian shall not waive any
rights it may have against a Securities Depository or Federal Reserve Bank. The
Company may elect to be subrogated to the rights of the Custodian against the
Securities Depository or Federal Reserve Bank or any other person with respect
to any claim that the Custodian may have as a consequence of any such loss or
damage, if and to the extent that the Company has not been made whole for any
such loss or damage.
SECTION 7. REGISTRATION OF SECURITIES
The Securities held by the Custodian, unless payable to bearer or
maintained in a Securities Depository or Book-Entry Account pursuant to Section
6, shall be registered in the name of the Custodian or in the name of its
nominee, or if directed by Written Instructions, in the name of the Company or
its nominee. In the event that any Securities are registered in the name of the
Company or its nominee, the Company will endorse, or cause to be endorsed, to
the Custodian dividend and interest checks, or will issue appropriate orders to
the issuers of the
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Securities to pay dividends and interest to the Custodian. Securities, excepting
bearer securities, delivered from time to time to the Custodian shall, in all
cases, be in due form for transfer, or registered as above provided.
SECTION 8. DISBURSEMENTS OF CASH
The Custodian is hereby authorized and directed to disburse cash to or
from the Company from time to time as follows:
(a) For the purchase of Securities by the Company, upon receipt by the
Custodian of (i) Written or Oral Instructions specifying the Securities and
stating the purchase price and the name of the broker, investment banker or
other party to or upon whose order the purchase price is to be paid and (ii)
either the Securities so purchased, in due form for transfer or already
registered as provided in Section 7, or notification by a Securities Depository
or a Federal Reserve Bank that the Securities have been credited to the
Custodian's account with the Securities Depository or Federal Reserve Bank.
(b) For transferring funds, including mark-to-the-market payments, in
connection with a repurchase agreement covering Securities that have been
received by the Custodian as provided in subsection (a) above, upon receipt by
the Custodian of (i) Written or Oral Instructions specifying the Securities, the
purchase price and the party to whom the purchase price is to be paid and (ii)
written agreement to repurchase the Securities from the Company.
(c) For transferring funds to a duly-designated redemption paying agent
to redeem or repurchase Shares, upon receipt of (i) either Share Certificates in
due form for transfer, or proper processing of Shares for which no Share
Certificates are outstanding and (ii) Written or Oral Instructions stating the
applicable redemption price.
(d) For exercising warrants and rights received upon the Securities,
upon timely receipt of Written or Oral Instructions authorizing the exercise of
such warrants and rights and stating the consideration to be paid.
(e) For repaying, in whole or in part, any loan of the Company, or
returning cash collateral for Securities loaned by the Company, upon receipt of
Written or Oral Instructions directing payment and stating the Securities, if
any, to be received against payment.
(f) For paying over to a duly-designated dividend disbursing agent such
amounts as may be stated in Written or Oral Instructions as the Company deems
appropriate to include in dividends or distributions declared on the Shares.
(g) For paying or reimbursing the Company for other corporate
expenditures, upon receipt of Written or Oral Instructions stating that such
expenditures are or were authorized by resolution of the Board and specifying
the amount of payment, the purposes for which such payment is to be made, and
the person or persons to whom payment is to be made.
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(h) For transferring funds to any Sub-Custodian, upon receipt of
Written or Oral Instructions and upon agreement by the Custodian.
(i) To advance or pay out accrued interest on bonds purchased,
dividends on stocks sold and similar items.
(j) To pay proper compensation and expenses of the Custodian.
(k) To pay, or provide the Company with money to pay, taxes, upon
receipt of appropriate Written or Oral Instructions.
(l) To transfer funds to a separate checking account maintained by the
Company.
(m) To pay interest, management or supervisory fees, administration,
dividend and transfer agency fees and costs, compensation of personnel and
operating expenses, including but not limited to fees for legal, accounting and
auditing services.
Before making any payments or disbursements, however, the Custodian
shall receive, and may conclusively rely upon, Written or Oral Instructions
requesting such payment or disbursement and stating that it is for one or more
of the purposes enumerated above. Notwithstanding the foregoing, the Custodian
may disburse cash for other corporate purposes; provided, however, that such
disbursement may be made only upon receipt of Written or Oral Instructions
stating that such disbursement was authorized by resolution of the Board.
SECTION 9. DELIVERY OF SECURITIES
The Custodian is hereby authorized and directed to deliver Securities
of the Company from time to time as follows:
(a) For completing sales of Securities sold by the Company, upon
receipt of (i) Written or Oral Instructions specifying the Securities sold, the
amount to be received and the broker, investment banker or other party to whom
or upon whose order the Securities are to be delivered and (ii) the net proceeds
of sale; provided, however, that the Custodian may accept payment in connection
with the sale of Book-Entry Securities and Securities on deposit with a
Securities Depository by means of a credit in the appropriate amount to the
account described in Section 6(b) or (c) above.
(b) For exchanging Securities for other Securities (and cash, if
applicable), upon timely receipt of (i) Written or Oral Instructions stating the
Securities to be exchanged, cash to be received and the manner in which the
exchange is to be made and (ii) the other Securities (and cash, if applicable)
as specified in the Written or Oral Instructions.
(c) For exchanging or converting Securities pursuant to their terms or
pursuant to any plan of conversion, consolidation, recapitalization,
reorganization, re-adjustment or otherwise, upon timely receipt of (i) Written
or Oral Instructions authorizing such exchange or conversion and stating the
manner in which such exchange or conversion
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is to be made, and (ii) the Securities, certificates of deposit, interim
receipts, and/or cash to be received as specified in the Written or Oral
Instructions.
(d) For presenting for payment Securities that have matured or have
been called for redemption;
(e) For delivering Securities upon redemption of Shares in kind, upon
receipt of (i) Share Certificates in due form for transfer, or proper processing
of Shares for which no Share Certificates are outstanding and (ii) appropriate
Written or Oral Instructions.
(f) For depositing with the lender Securities to be held as collateral
for a loan to the Company or depositing with a borrower Securities to be loaned
by the Company, (i) upon receipt of Written or Oral Instructions directing
delivery to the lender or borrower and suitable collateral, if Securities are
loaned or (ii) pursuant to the terms of a separate securities lending agreement.
(g) For complying with a repurchase agreement, upon receipt of (i)
Written or Oral Instructions stating the securities to be delivered and the
payment to be received, and (ii) payment.
(h) For depositing Securities of the Company with a depository agent in
connection with a tender or other similar offer to purchase such Securities,
upon receipt of Written or Oral Instructions.
(i) For depositing Securities with the issuer thereof, or its agents,
for the purpose of transferring such Securities into the name of the Company,
the Custodian, or any nominee of either in accordance with Section 7.
(j) For other proper corporate purposes; provided, that the Custodian
shall receive Written or Oral Instructions requesting such delivery.
(k) Notwithstanding the foregoing, the Custodian may, without Written
or Oral Instructions, surrender and exchange Securities for other Securities in
connection with any reorganization, recapitalization, or similar transaction in
which the owner of the Securities is not given an option; provided, however,
that the Custodian has no responsibility to effect any such exchange unless it
has received actual notice of the event permitting or requiring such exchange.
To facilitate any such exchange, the Custodian is authorized to surrender
against payment maturing obligations and obligations called for redemption and
to effectuate the exchange in accordance with customary practices and procedures
established in the market for exchanges.
SECTION 10. BORROWINGS
The Company will cause any person (including the Custodian) from which
it borrows money using Securities as collateral to deliver to the Custodian a
notice of undertaking in the form currently employed by the lender setting forth
the amount that the lender will loan to the
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Company against delivery of a stated amount of collateral. The Company shall
promptly deliver to the Custodian Written or Oral Instructions for each loan,
stating (i) the name of the lender, (ii) the amount and terms of the loan, which
terms may be specified by incorporating by reference an attached promissory note
or loan agreement duly endorsed by the Company, (iii) the time and date, if
known, on which the loan will be consummated (the "borrowing date"), (iv) the
date on which the loan becomes due and payable, (v) the total amount payable to
the Company on the borrowing date, (vi) the market value of Securities to be
delivered as collateral for such loan and (vii) the name of the issuer, the
title and the number of shares or principal amount of the Securities to be
delivered as collateral. The Custodian shall deliver on the borrowing date such
specified collateral and the executed promissory note, if any, and receive from
the lender the total amount of the loan proceeds; provided, however, that no
delivery of Securities shall occur if the amount of loan proceeds does not
conform to the amount set forth in the Written or Oral Instructions, or if such
Instructions do not contain the requirements of (vii) above. The Custodian may,
at the option of the lender, keep such collateral in its possession; provided
such collateral is subject to all rights given the lender by any promissory note
or loan agreement executed by the Company.
The Custodian shall deliver, from time to time, any Securities required
as additional collateral for any transaction described in this Section, upon
receipt of Written or Oral Instructions. The Company shall cause all Securities
released from collateral status to be returned directly to the Custodian.
SECTION 11. INDEBTEDNESS TO CUSTODIAN
If, in its sole discretion, the Custodian advances funds to the Company
to pay for the purchase of Securities, to cover an overdraft of the Company's
account with the Custodian, or to pay any other indebtedness to the Custodian,
the Company's indebtedness shall be deemed to be a loan by the Custodian to the
Company, payable on demand and bearing interest at the rate then charged by the
Custodian for such loans; provided, however, that the Custodian shall give the
Company notice of any such advance that exceeds five percent of the value of the
Securities and cash held by the Custodian at the time of the advance. The
Company hereby agrees that the Custodian shall have a continuing lien and
security interest, to the extent of any such overdraft or indebtedness, in any
property then held by the Custodian or its agents for the benefit of the
Company, or in which the Company may have an interest. The Company authorizes
the Custodian, in its sole discretion at any time, to charge any such overdraft
or indebtedness, together with interest due thereon, against any balance then
credited to the Company on the Custodian's books.
SECTION 12. SECURITIES LOANS
The Custodian may from time to time lend securities of the Company in
accordance with, and pursuant to, a separate securities lending agreement.
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SECTION 13. OPTIONS, FUTURES CONTRACTS AND SEGREGATED ACCOUNTS
The Custodian's responsibilities regarding option contracts will be
governed by the following sub-paragraphs:
(a) Options.
-------
(i) Upon receipt of Written or Oral Instructions relating to the
purchase of an option or sale of a covered call option, the Custodian shall: (A)
receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of the option; (B) if the transaction involves the sale of a
covered call option, deposit and maintain in a segregated account the Securities
(either physically or by book-entry in a Securities Depository) subject to the
covered call option written on behalf of the Funds; and (C) pay, release and/or
transfer such securities, cash or other assets in accordance with any notices or
other communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the Securities or Options Exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(ii) Upon receipt of instructions relating to the sale of a
naked option (including stock index and commodity options), the Custodian, the
Company and the broker-dealer shall enter into an agreement to comply with the
rules of the OCC or of any registered national securities exchange or similar
organizations(s). Pursuant to that agreement and any Written or Oral
Instructions, the Custodian shall: (A) receive and retain confirmations or other
documents, if any, evidencing the writing of the option; (B) deposit and
maintain in a segregated account Securities (either physically or by book-entry
in a Securities Depository cash and/or other assets; and (C) pay, release and/or
transfer such Securities, cash or other assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the Securities or Options Exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The Custodian shall not be responsible for determining the
quality and quantity of assets held in any segregated account established in
compliance with applicable margin maintenance requirements and the performance
of other terms of any option contract.
(b) Futures Contracts. Upon receipt of Written or Oral Instructions,
-----------------
the custodian shall enter into a futures margin procedural agreement among the
Fund, the Custodian and the designated futures commission merchant (a
"Procedural Agreement"). Under the Procedural Agreement the Custodian shall: (A)
receive and retain confirmations, if any, evidencing the purchase or sale of a
futures contract or an option on a futures contract by a Series; (B) deposit and
maintain in a segregated account cash, Securities and/or other assets designated
as initial, maintenance or variation "margin" deposits intended to secure the
Funds' performance of its obligations under any futures contracts purchased or
sold, or any options on futures contracts written by the Funds, in accordance
with the provisions of any Procedural Agreement designed
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to comply with the provisions of the Commodity Futures Trading Commission and/or
any commodity exchange or contract market (such as the Chicago Board of Trade),
or any similar organization(s), regarding such margin deposits; and (C) release
assets from and/or transfer assets into such margin accounts only in accordance
with any such Procedural Agreements. The Custodian shall not be responsible for
determining the type and amount of assets held in the segregated account or paid
to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(c) Segregated Accounts. Upon receipt of Written or Oral Instructions,
-------------------
the Custodian shall establish and maintain on its books a segregated account or
accounts for and on behalf of the Funds, into which account or accounts may be
transferred assets of each Fund, including Securities maintained by the
Custodian in a Securities Depository, said account or accounts to be maintained
(i) for the purpose of compliance by the Fund with the procedures required by
SEC Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (ii) for such other purposes as may be set forth, from
time to time, in Written or Oral Instructions. The Custodian shall not be
responsible for the determination of the type or amount of assets to be held in
any segregated account referred to in this paragraph.
SECTION 14. EXERCISE OF POWERS WITH RESPECT TO SECURITIES
The Custodian assumes no duty, obligation or responsibility whatsoever
to exercise any voting or consent powers with respect to the Securities held by
it from time to time hereunder. The Company or such persons as it may designate
shall have the right to vote, consent or otherwise act with respect to
Securities. The Custodian will exercise its best efforts (as defined in Section
16) to furnish to the Company in a timely manner all proxies or other
appropriate authorizations with respect to Securities registered in the name of
the Custodian or its nominee, so that the Company or its designee may vote,
consent or otherwise act.
SECTION 15. COMPENSATION
(a) The Company agrees to pay to the Custodian compensation for its
services as set forth in Appendix B hereto, or as shall be set forth in written
amendments to Appendix B, as approved by the Company and the Custodian from time
to time.
(b) The Company shall pay all fees and expenses of any Sub-Custodian
approved by the Company.
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<PAGE>
SECTION 16. CORPORATE ACTIVITY
The Custodian will exercise its best efforts to forward to the Company
in a timely manner all notices of shareholder meetings, proxy statements, annual
reports, conversion notices, call notices, or other notices or written materials
of any kind (excluding share certificates and dividend, principal and interest
payments) sent to the Custodian as registered owner of Securities. "Best
efforts," as used in this Agreement, shall mean the efforts reasonably believed
in good faith by the Custodian to be adequate in the circumstances.
Upon receipt of warrants or rights issued in connection with the assets
of the Company, the Custodian shall enter into its ledgers appropriate notations
indicating such receipt and shall notify the Company of such receipt. However,
the Custodian shall have no obligation to take any other action with respect to
such warrants or rights, except as directed in Written or Oral Instructions.
The Custodian shall take all reasonable actions, as agreed to by the
Company and the Custodian, to assist the Company in obtaining from year to year
favorable opinions from the Company's independent auditors with respect to the
Custodian's activities hereunder.
SECTION 17. RECORDS
The Custodian acknowledges and agrees that all books and records
maintained for the Company in any capacity under this Agreement are the property
of the Company and may be inspected by the Company or any authorized regulatory
agency at any reasonable time. Upon request all such books and records will be
surrendered promptly to the Company. The Custodian agrees to make available upon
request and to preserve for the periods prescribed in Rule 31a-2 of the Act any
records related to services provided under this Agreement and required to be
maintained by Rule 31a-1 under the Act.
SECTION 18. LIABILITY
The Custodian assumes only the usual duties and obligations normally
performed by custodians of open-end investment companies. The Custodian
specifically assumes no responsibility for the management, investment or
reinvestment of the Securities from time to time owned by the Company, whether
or not on deposit hereunder. The Custodian assumes no duty, obligation or
responsibility whatsoever with respect to Securities not deposited with the
Custodian.
The Custodian may rely upon the advice of counsel, who may be counsel
for the Company or for the Custodian, and upon statements of accountants,
brokers or other persons believed by the Custodian in good faith to be expert in
the matters upon which they are consulted. The Custodian shall not be liable for
any action taken in good faith reliance upon such advice or statements. The
Custodian shall not be liable for action taken in good faith in accordance with
any Written or Oral Instructions, request or advice of the Company or its
officers, or information furnished by the Company or its officers. The Custodian
shall not be
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liable for any non-negligent action taken in good faith and reasonably believed
by it to be within the powers conferred upon it by this Agreement.
No liability of any kind, other than to the Company, shall attach to the
Custodian by reason of its custody of the Securities and cash held by the
Custodian hereunder or otherwise as a result of its custodianship. In the event
that any claim shall be made against the Custodian, it shall have the right to
pay the claim and reimburse itself from the assets of the Company; provided,
however, that no such reimbursement shall occur unless the Company is notified
of the claim and is afforded an opportunity to contest or defend the claim, if
it so elects. The Company agrees to indemnify and hold the Custodian harmless
for any loss, claim, damage or expense arising out of the custodian relationship
under this Agreement; provided such loss, claim, damage or expense is not the
direct result of the Custodian's negligence or willful misconduct.
SECTION 19. TAXES
The Custodian shall not be liable for any taxes, assessments or
governmental charges that may be levied or assessed upon the Securities held by
it hereunder, or upon the income therefrom. Upon Written or Oral Instruction,
the Custodian may pay any such tax, assessment or charge and reimburse itself
out of the monies of the Company or the Securities held hereunder.
SECTION 20. SUB-CUSTODIANS
(a) The Custodian may from time to time request appointment of one or
more Sub-Custodians. Upon receipt of Written or Oral Instructions authorizing
the use of a Sub-Custodian, the Custodian shall appoint one or more Sub-
Custodians or Foreign Sub-Custodians of Securities and cash owned by the Company
from time to time.
(b) The Custodian shall cause Foreign Securities and amounts of cash
reasonably required to effect Company's Foreign Securities transactions in the
Custodian Account to be held in such countries or other jurisdictions as the
Company shall direct in Written or Oral Instructions.
The Custodian may hold Foreign Securities and cash in sub-custody
accounts, which shall be deemed part of the Custodian Account and which have
been established by the Custodian or by a Sub-Custodian with those Foreign Sub-
Custodians as the Company shall approve in Written or Oral Instructions.
Each Foreign Sub-Custodian is authorized to hold Foreign Securities in
an account with any foreign Securities Depository as the Company shall approve
in Written or Oral Instructions.
The contractual agreement between the Custodian and any Foreign Sub-
Custodian must provide at a minimum that the Foreign Sub-Custodian shall
provide, obtain or use its best efforts to assist the Company in obtaining
information responsive to the "notes" to Rule 17f-5 under the Act with respect
to (i) each country or jurisdiction where the Company's assets are proposed to
be maintained, are maintained or in the future may be maintained and (ii) each
Foreign Sub-
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Custodian which is proposed to hold, holds or in the future may hold Foreign
Securities or cash of the Company. Notwithstanding any other provisions of this
Agreement, each Foreign Sub-Custodian's undertaking to assist the Company in
obtaining such information shall neither increase the Foreign Sub-Custodian's
duty of care nor reduce the Company's responsibility to determine for itself the
prudence of entrusting its assets to any particular Foreign Sub-Custodian or
foreign Securities Depository.
The Custodian shall deposit Foreign Securities and cash of the Company
with a Foreign Sub-Custodian only in an account of the Foreign Sub-Custodian
which holds only assets held by Custodian as custodian for its customers. In the
event that a Foreign Sub-Custodian is authorized to hold any of the Foreign
Securities placed in its care in a foreign Securities Depository, the Custodian
will direct the Foreign Sub-Custodian to identify the Foreign Securities on the
books of the foreign Securities Depository as being held for the account of the
Custodian as custodian for its customers.
(c) The Custodian shall have no liability to the Company by reason of
any act or omission of any Sub-Custodian approved by the Company, and the
Company shall indemnify the Custodian and hold it harmless from and against any
and all actions, suits, claims, losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising directly or indirectly out of or in
connection with the performance of any Sub-Custodian approved by the Company.
The Custodian assigns to the Company any and all claims for any losses, costs,
expenses, or damages that may be incurred by the Company by reason of the
negligence, gross negligence or misconduct of any Sub-Custodian approved by the
Company, or by reason of the failure of a Sub-Custodian approved by the Company
to perform in accordance with any applicable agreement, including instructions
of the Custodian. The Custodian shall be under no obligation to prosecute or to
defend any action, suit or claim arising out of, or in connection with, the
performance of any Sub-Custodian approved by the Company, if, in the opinion of
the Custodian's counsel, such action will involve expense or liability to the
Custodian. The Company shall, upon request, furnish the Custodian with
satisfactory indemnity against such expense or liability, and upon request of
the Custodian, the Company shall assume the entire defense of any action, suit,
or claim subject to the foregoing indemnity.
With respect to each Sub-Custodian not approved by the Company, which
may not be a Foreign Sub-Custodian, the Custodian shall be liable to the Company
for any loss which shall occur as a result of the failure of the Sub-Custodian
to exercise reasonable care with respect to the safekeeping of assets to the
same extent that the Custodian would be liable to the Company if the Custodian
were holding such assets in its own premises. The Custodian shall be liable to
the Company under this paragraph only to the extent of the Company's direct
damages, to be determined based on the market value of the assets which are
subject to loss and without reference to any special conditions or
circumstances.
SECTION 21. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement may be executed in more than one counterpart, each of
which shall be deemed to be an original, and shall become effective on the date
hereof. This Agreement
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shall remain in effect for a period of one year from the date of its
effectiveness and shall continue in effect for successive twelve-month periods;
provided that such continuance is specifically approved at least annually by the
Board and by a majority of the Directors who are not parties to this Agreement
or interested persons of any such party.
(b) This Agreement may be terminated by either party upon notice to the
other. The termination shall become effective at the time specified in the
notice but no earlier than sixty (60) days after the date of the notice. Upon
notice of termination, the Company shall use its best efforts to obtain a
successor custodian. If a successor custodian is not appointed within ninety
(90) days after the date of the notice of termination, the Board shall, by
resolution, designate the Company as its own custodian. Each successor custodian
shall be a person qualified to serve under the Act. Promptly following receipt
of written notice from the Company of the appointment of a successor custodian
and receipt of Written or Oral Instructions, the Custodian shall deliver all
Securities and cash it then holds directly to the successor custodian and shall,
upon request of the Company and the successor custodian and upon payment of the
Custodian's reasonable charges and disbursements, (i) execute and deliver to the
successor custodian an instrument approved by the successor custodian's counsel
transferring to the successor custodian all the rights, duties and obligations
of the Custodian, (ii) transfer to the successor custodian the originals or
copies of all books and records maintained by the Custodian hereunder and (iii)
cooperate with, and provide reasonable assistance to, the successor custodian in
the establishment of the books and records necessary to carry out the successor
custodian's responsibilities hereunder. Upon delivery of the Securities and
other assets of the Company and compliance with the other requirements of this
Section 21, the Custodian shall have no further duty or liability hereunder.
Every successor custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, duties and obligations of the predecessor custodian.
SECTION 22. REQUIRED PERFORMANCE ON FUND BUSINESS DAYS
Nothing contained in this Agreement is intended to or shall require the
Custodian, in any capacity hereunder, to perform any functions or duties on any
day other than a Fund Business Day. Functions or duties normally scheduled to be
performed on any day which is not a Fund Business Day shall be performed on, and
as of, the next Fund Business Day unless otherwise required by law.
SECTION 23. MISCELLANEOUS
(a) This Agreement shall extend to and bind the parties hereto and their
respective successors and assigns; provided, however, that this Agreement shall
not be assignable by the Company without the written consent of the Custodian,
or by the Custodian without the written consent of the Company. Notwithstanding
the foregoing, either party may assign this Agreement without the consent of the
other party so long as the assignee is an affiliate, parent or subsidiary of the
assigning party and the assignee of the Custodian is qualified to serve as
custodian under the Act.
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(b) This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
(c) The captions inserted herein are for convenience of reference and
shall not affect, in any way, the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
STAGECOACH FUNDS, INC.
By: /s/ Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
Chief Operating Officer
NORWEST BANK MINNESOTA, N.A.
By: /s/ Carol Warner
---------------------------
Carol Warner
Title:
------------------------
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STAGECOACH FUNDS, INC.
CUSTODY AGREEMENT
June 4, 1999
Appendix A
List of Funds
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California Tax-Free Bond Fund
California Tax-Free Income Fund
California Tax-Free Money Market Fund
California Tax-Free Money Market Trust
Diversified Equity Income Fund
Growth Fund
Money Market Fund
National Tax-Free Money Market Fund
National Tax-Free Money Market Trust
Short-Intermediate U.S. Government Income Fund
Strategic Growth Fund
100% Treasury Money Market Fund
U.S. Government Income Fund
Arizona Tax-Free Fund
Balanced Fund
Equity Value Fund
Government Money Market Fund
Money Market Trust National Tax-Free Fund
Oregon Tax-Free Fund
Prime Money Market Fund
Small Cap Fund
Strategic Income Fund
Treasury Plus Money Market Fund
Overland Express Sweep Fund
Variable Rate Government Fund
Corporate Bond Fund
<PAGE>
STAGECOACH FUNDS, INC.
CUSTODY AGREEMENT
June 4, 1999
Appendix B
Fee Schedule
------------
For custody and fund accounting services, Norwest Bank shall receive a
fee, with respect to each Fund listed in Appendix A, of 0.0167% of the average
daily net assets of each such Fund for custody services, and for fund accounting
services, a monthly base fee per Fund of $2,000, plus a fee equal to an annual
rate of 0.07% of the first $50 million of each applicable Fund's average daily
net assets, 0.045% of the next $50 million of each Fund's average daily net
assets, and 0.02% of each Fund's average daily net assets in excess of $100
million.
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CUSTODY AGREEMENT
STAGECOACH FUNDS, INC.
111 Center Street
Little Rock, Arkansas 72201
This Agreement is made as of this 12/th/ day of December, 1997 (the
"Agreement"), by and between STAGECOACH FUNDS, INC. (the "Company"), on behalf
of the Funds listed on Appendix F hereto, as such Appendix may be revised from
time to time (each a "Fund" and, collectively, the "Funds"), and BARCLAYS GLOBAL
INVESTORS, N.A. (the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Company and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meaning:
1. "Authorized Person" shall be deemed to include the treasurer, the
controller or any other person, whether or not any such person is an Officer or
employee of the Company, duly authorized by the Board of Directors ("Directors")
to give Oral Instructions and Written Instructions on behalf of a Fund and
listed in the Certificate attached hereto as Appendix A or such other
Certificate as may be received from time to time by the Custodian.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-
entry system for United States and federal agency securities, its successor(s)
and its nominee(s).
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian, which is actually received by the Custodian and signed on behalf of a
Fund by any two Officers of the Company.
4. "Clearing Member" shall mean a registered broker-dealer that is a
member of a national securities exchange qualified to act as a custodian for an
investment company, or any broker-dealer reasonably believed by the Custodian to
be such a clearing member.
5. "Depository" shall mean The Depository Trust Company ("DTC"),
Participants Trust Company ("PTC"), and any other clearing agency registered
with the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, its successor(s) and its nominee(s), provided the
Custodian has received a certified copy of a resolution of the Board of
Directors specifically approving deposits in DTC, PTC or such other clearing
agency. The term "Depository" shall further mean and include any person
authorized to act as a depository pursuant to Section 17, Rule 17f-4 or Rule
17f-5 thereunder, under the Investment Company Act of 1940, its successor(s) and
its
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nominee(s), specifically identified in a certified copy of a resolution of the
Board of Directors approving deposits therein by the Custodian.
6. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, or Clearing Member, or in the name of the Company or a Fund for
the benefit of a broker, dealer, or Clearing Member, or otherwise, in accordance
with an agreement between the Company on behalf of a Fund, the Custodian and a
broker, dealer, or Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or moneys of
a Fund shall be deposited and withdrawn from time to time in connection with
such transactions as a Fund may from time to time determine. Securities held in
the Book-Entry System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry on its books and records.
7. "Money Market Securities" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal and interest
by the government of the United States or agencies or instrumentalities thereof,
commercial paper, certificates of deposit and bankers' acceptances, repurchase
and reverse repurchase agreements with respect to the same and bank time
deposits, where the purchase and sale of such securities normally requires
settlement in federal funds on the same date as such purchase or sale.
8. "Officers" shall be deemed to include the President, Vice President,
the Secretary, the Treasurer, the Controller, any Assistant Secretary, any
Assistant Treasurer or any other person or persons duly authorized by the
Directors of the Company to execute any Certificate, instruction, notice or
other instrument on behalf of a Fund and listed in the Certificate attached
hereto as Appendix B or such other Certificate as may be received by the
Custodian from time to time.
9. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Authorized Person or from a person reasonably believed
by the Custodian to be an Authorized Person.
10. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which a Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
11. "Security" or "Securities" shall be deemed to include, without
limitation, Money Market Securities, Reverse Repurchase Agreements, common stock
and other instruments or rights having characteristics similar to common stocks,
preferred stocks, debt obligations issued by state or municipal governments and
by public authorities (including, without limitation, general obligations
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
12. "Segregated Security Account" shall mean an account maintained under
the terms of this Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain Securities and/or other
assets of a Fund shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as a Fund may from time to time determine.
13. "Shares" shall mean the shares of common stock of a Fund, each of
which, in the case of a Fund having Series, is allocated to a particular Series.
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<PAGE>
14. "Written Instructions" shall mean written communications actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the authenticity of the sender
of such communication.
ARTICLE II
APPOINTMENT OF A CUSTODIAN
1. The Company on behalf of a Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and moneys at any time owned by a
Fund during the term of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform all the duties thereof as set forth in this Agreement.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in Article V, a Fund will deliver or
cause to be delivered to the Custodian all Securities and all moneys owned by
it, including cash received for the issuance of its Shares, at any time during
the term of this Agreement. The Custodian will not be responsible for such
Securities and such moneys until actually received by it. The Custodian will be
entitled to reverse any credits made on a Fund's behalf where such credits have
been previously made and moneys are not finally collected. A Fund shall deliver
to the Custodian a certified resolution of the Directors of the Company
authorizing and instructing the Custodian on a continuous and ongoing basis to
deposit in the Book-Entry System all Securities eligible for deposit therein and
to utilize the Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities of a Fund in the Depository, a Fund shall deliver to the Custodian a
certified resolution of the Directors of the Company approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities eligible for deposit therein and to utilize the
Depository to the extent possible in connection with its performance hereunder,
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys of a Fund deposited in either the
Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity.
2. The Custodian shall credit to a separate account in the name of a
Fund all moneys received by it for the account of a Fund, and shall disburse the
same only:
(a) In payment for Securities purchased, as provided in Article IV
hereof;
(b) In payment of dividends or distributions, as provided in Article
VIII hereof;
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(c) In payment of original issue or other taxes, as provided in Article
IX hereof;
(d) In payment for Shares redeemed by it, as provided in Article IX
hereof;
(e) Pursuant to Certificate(s) setting forth the name(s) and address(es)
of the person(s) to whom the payment is to be made, and the purpose for which
payment is to be made; or
(f) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian, as provided in Article XII hereof.
3. Promptly after the close of business on each day, the Custodian
shall furnish a Fund with confirmations and a summary of all transfers to or
from the account of a Fund during said day. Where Securities are transferred to
the account of a Fund, the Custodian shall also by book-entry or otherwise
identify as belonging to a Fund a quantity of Securities in a fungible bulk of
Securities registered in the name of the Custodian (or its nominee) or shown on
the Custodian's account on the books of the Book-Entry System or the Depository.
The Custodian shall furnish a Fund at least monthly with a detailed statement of
the Securities and moneys held for a Fund under this Agreement.
4. Except as otherwise provided in Article V, all Securities held for a
Fund which are issued or issuable only in bearer form, except such Securities as
are held in the Book-Entry System, shall be held by the Custodian in that form;
all other Securities held for a Fund may be registered in the name of a Fund, in
the name of any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor(s) or their nominee(s). The Company
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of a Fund and which
may from time to time be registered in the name of a Fund. The Custodian shall
hold all such Securities which are not held in the Book-Entry System or in the
Depository in a separate account in the name of a Fund physically segregated at
all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to the
Securities therein deposited, shall, with respect to all Securities held for a
Fund in accordance with this Agreement:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix C annexed hereto, which may be amended at
any time by the Custodian upon five business days' prior notification to a Fund;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive Securities;
4
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(e) Execute, as Custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Fund all
rights and similar securities issued with respect to any Securities held by the
Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of a Fund as owner of any Securities may be exercised;
(b) Deliver any Securities held for a Fund in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) Deliver any Securities held for a Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfer or exchanges of the assets of a Fund and take
such other steps as shall be stated in said order to be for the purpose of
effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of a Fund; and
(e) Present for payment and collect the amount payable upon Securities
not described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase or sale (as applicable) of Securities
by a Fund, other than a purchase or sale of any Reverse Repurchase Agreement, a
Fund shall deliver to the Custodian (i) with respect to each purchase or sale of
Securities which are not Money Market Securities, a Certificate; and (ii) with
respect to each purchase or sale of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect to each such
purchase or sale: (a) the name of the issuer and the title of the Securities;
(b) the number of shares or the principal amount purchased or sold and accrued
interest, if any; (c) the date of purchase or sale and settlement date; (d) the
purchase or sale price per unit; (e) the total amount payable upon such purchase
or sale; (f) the name of the person from whom or the broker through whom the
purchase or sale was made, and the name of the clearing broker, if any; (g) in
the case of a purchase, the name of the broker to which payment is to be made;
and (h) in the case of a sale, the name of the broker to whom the Securities are
to be delivered. In the case of a purchase, the Custodian shall, upon receipt of
Securities purchased by or for a Fund, pay out of the moneys held for the
account of a Fund the total amount payable to the person from whom, or the
broker through whom, the
5
<PAGE>
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate, Oral Instructions or Written Instructions. In
the case of a sale, the Custodian shall deliver the Securities upon receipt of
the total amount payable to a Fund upon such sale, provided that the same
conforms to the total amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in securities.
ARTICLE V
SHORT SALES
1. Promptly after any short sale, a Fund shall deliver to the Custodian
a Certificate specifying: (a) the name of the issuer and the title of the
Security; (b) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (c) the dates of the sale and settlement; (d) the
sale price per unit; (e) the total amount credited to a Fund upon such sale, if
any (f) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (g) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Segregated Security
Account; and (h) the name of the broker through which such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to a Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of a Fund, issue a
receipt or make the deposits into the Margin Account and the Segregated Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, a Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing-out: (a) the name of the issuer and the title of the Security; (b)
the number of shares or the principal amount, and accrued interest or dividends,
if any, required to effect such closing-out to be delivered to the broker; (c)
the dates of the closing-out and settlement; (d) the purchase price per unit;
(e) the net total amount payable to a Fund upon such closing-out; (f) the net
total amount payable to the broker upon such closing-out; (g) the amount of cash
and the amount and kind of Securities, if any, to be withdrawn, from the Margin
Account; (h) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Segregated Security Account; and (i) the name of
the broker through which a Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to a Fund upon such closing-
out and the return and/or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out the moneys
held for the account of a Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Segregated
Security Account, as the same are specified in the Certificate.
ARTICLE VI
REVERSE REPURCHASE AGREEMENTS
1. Promptly after a Fund enters into a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, a Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions or
Written Instructions specifying: (a) the total amount payable to a Fund in
connection with such Reverse Repurchase Agreement; (b) the broker or dealer
through or with which the
6
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Reverse Repurchase Agreement is entered; (c) the amount and kind of Securities
to be delivered by a Fund to such broker or dealer; (d) the date of such Reverse
Repurchase Agreement; and (e) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Segregated Security Account in
connection with such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to a Fund specified in the Certificate, Oral
Instructions or Written Instructions make the delivery to the broker or dealer,
and the deposits, if any, to the Segregated Security Account, specified in such
Certificate, Oral Instructions or Written Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
paragraph 1 of this Article VI, a Fund shall promptly deliver a Certificate or,
in the event such Reverse Repurchase Agreement is a Money Market Security, a
Certificate, Oral Instructions or Written Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated; (b) the
total amount payable by a Fund in connection with such termination; (c) the
amount and kind of Securities to be received by a Fund in connection with such
termination; (d) the date of termination; (e) the name of the broker or dealer
with or through which the Reverse Repurchase Agreement is to be terminated; and
(f) the amount of cash and/or the amount and kind of Securities to be withdrawn
from the Segregated Security Account. The Custodian shall, upon receipt of the
amount and kind of Securities to be received by a Fund specified in the
Certificate, Oral Instructions or Written Instructions, make the payment to the
broker or dealer, and the withdrawals, if any, from the Segregated Security
Account, specified in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE VII
MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Segregated Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the amount of cash
and/or the amount and kind of Securities to be deposited in, or withdrawn from,
the Segregated Security Account. In the event that a Fund fails to specify in a
Certificate the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities to be deposited by the Custodian
into, or withdrawn from, a Segregated Securities Account, the Custodian shall be
under no obligation to make any such deposit or withdrawal and shall so notify a
Fund.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein.
5. On each business day, the Custodian shall furnish a Fund with a
statement with respect to a Fund's Margin Account in which money or Securities
are held specifying as of the close of business on the previous business day:
(a) the name of the Margin Account; (b) the amount and kind of Securities
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held therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker or dealer specified in the name of a Margin
Account a copy of the statement furnished a Fund with respect to such Margin
Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account, the Custodian
shall furnish a Fund with a statement with respect to a Fund's Collateral
Account specifying the amount of cash and/or the amount and kind of Securities
held therein. No later than the close of business next succeeding the delivery
to a Fund of such statement, a Fund shall furnish the Custodian with a
Certificate or Written Instructions specifying the then market value of the
Securities described in such statement.
ARTICLE VIII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. A Fund shall furnish the Custodian with a copy of the resolution of
the Directors, certified by the Secretary or any Assistant Secretary, either (i)
setting forth the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the shareholders of
record as of that date and the total amount payable to the Dividend Agent of a
Fund on the payment date, or (ii) authorizing the declaration of dividends and
distributions on a daily basis or some other periodic basis and authorizing the
Custodian to rely on Oral Instructions, Written Instructions or a Certificate
setting forth the date of the declaration of such dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the shareholders of
record as of that date and the total amount payable to the Dividend Agent on the
payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions or Certificate, the Custodian shall pay out
the moneys held for the account of a Fund the total amount payable to the
Dividend Agent of a Fund.
ARTICLE IX
SALE AND REDEMPTION OF SHARES
1. Whenever a Fund shall sell any of its Shares, it shall deliver to the
Custodian a Certificate duly specifying the number of Shares sold, trade date,
price and the amount of money to be received by the Custodian for the sale of
such Shares.
2. Upon receipt of such money from the Transfer Agent or a co-transfer
agent, the Custodian shall credit such money to the account of a Fund.
3. Upon issuance of any of a Fund's Shares in accordance with the
foregoing provisions of this Article IX, the Custodian shall pay, out of the
money held for the account of a Fund, all original issue or other taxes required
to be paid by a Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever a Fund shall redeem any of
its Shares, it shall furnish the Custodian with a Certificate specifying the
number of Shares redeemed and the amount to be paid for the Shares redeemed.
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5. Upon receipt from the Transfer Agent or co-transfer agent of an
advice setting forth the number of Shares received by the Transfer Agent or co-
transfer agent for redemption, and that such Shares are valid and in good form
for redemption, the Custodian shall make payment to the Transfer Agent or co-
transfer agent, as the case may be, out of the moneys held for the account of a
Fund of the total amount specified in the Certificate issued pursuant to
paragraph 4 of this Article IX.
6. Notwithstanding the above provisions regarding the redemption of any
of a Fund's Shares, whenever its Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by a Fund, the
Custodian, unless otherwise instructed by a Certificate, shall, upon receipt of
an advice from a Fund or its agent setting forth that the redemption is in good
form for redemption in accordance with the check redemption procedure, honor the
check presented as part of such check redemption privilege out of the money held
in the account of a Fund for such purposes.
ARTICLE X
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of a Fund which results in an overdraft because the moneys held by the
Custodian for the account of a Fund shall be insufficient to pay the total
amount payable upon a purchase of Securities as set forth in a Certificate or
Oral Instructions issued pursuant to Article IV, or which results in an
overdraft for some other reason, or if a Fund is, for any other reason, indebted
to the Custodian (except a borrowing for investment or for temporary or
emergency purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this Article X), such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian to
a Fund payable on demand and shall bear interest from the date incurred at a
rate per annum (based on a 360-day year for the actual number of days involved)
equal to 1/2% over the Custodian's prime commercial lending rate in effect from
time to time, such rate to be adjusted on the effective date of any change in
such prime commercial lending rate but in no event to be less than 6% per annum.
Any such overdraft or indebtedness shall be reduced by an amount equal to the
total of all amounts due a Fund which have not been collected by the Custodian
on behalf of a Fund when due because of the failure of the Custodian to make
timely demand or presentment for payment. In addition, the Company on behalf of
a Fund hereby agrees that the Custodian shall have a continuing lien and
security interest in and to any property at any time held by it for the benefit
of a Fund or in which a Fund may have an interest which is then in the
Custodian's possession or control or in possession or control of any third party
acting on the Custodian's behalf. The Company authorizes the Custodian, in its
sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of account standing to a
Fund's credit on the Custodian's books.
2. A Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting forth the
amount which such bank will loan to a Fund against delivery of a stated amount
of collateral. A Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the name of the bank; (b)
the amount and terms of the borrowing, which may be set forth by incorporating
by reference an attached promissory note, duly endorsed by a Fund, or other loan
agreement; (c) the time and date, if known, on which the loan is to be entered
into; (d) the date on which the loan becomes due and payable; (e) the total
amount payable to a Fund on the borrowing date; (f) the market value of
Securities to be
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delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal of any particular Securities;
and (g) a statement specifying whether such loan is for investment purposes or
for temporary or emergency purposes and that such loan is in conformance with
the Investment Company Act of 1940 and a Fund's prospectus. The Custodian shall
deliver on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amounts payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. A Fund shall cause all Securities released from collateral status to
be returned directly to the Custodian, and the Custodian shall receive from time
to time such return of collateral as may be tendered to it. In the event that a
Fund fails to specify in a Certificate the name of the issuer, the title and
number of shares or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
ARTICLE XI
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. If a Fund is permitted by the terms of the Company's Articles of
Incorporation and as disclosed in a Fund's most recent and currently effective
prospectus to lend its portfolio Securities, within twenty-four (24) hours after
each loan of portfolio Securities a Fund shall deliver or cause to be delivered
to the Custodian a Certificate specifying with respect to each such loan; (a)
the name of the issuer and the title of the Securities; (b) the number of shares
or the principal amount loaned; (c) the date of loan and delivery; (d) the total
amount to be delivered to the Custodian against the loan of the Securities,
including the amount of cash collateral and the premium, if any, separately
identified; and (e) the name of the broker, dealer or financial institution to
which the loan was made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to which the loan was
made upon receipt of the total amount designated as to be delivered against the
loan of Securities. The Custodian may accept payment in connection with a
delivery otherwise than through the Book-Entry System or Depository only in the
form of a certified or bank cashier's check payable to the order of a Fund or
the Custodian drawn on New York Clearing House funds and may deliver Securities
in accordance with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by a Fund,
it shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the name of the issuer and the title of the Securities to be returned; (b)
the number of shares or the principal amount to be returned; (c) the date of
termination; (d) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate); and (e) the name of the broker, dealer or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of a Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
10
<PAGE>
ARTICLE XII
THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including attorney's fees, resulting
from its action or omission to act or otherwise, either hereunder or under any
Margin Account Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to a Fund or of its own
counsel, at the expense of a Fund, and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to a Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence, misfeasance or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold or
written by or for a Fund, the legality of the purchase, sale or writing thereof,
or the propriety of the amount paid or received thereof;
(b) The legality of the issue or sale of any of a Fund's Shares, or the
sufficiency of the amount to be received therefor;
(c) The legality of the redemption of any of a Fund's Shares, or the
propriety of the amount to be paid therefor;
(d) The legality of the declaration or payment of any dividend by a
Fund;
(e) The legality of any borrowing by a Fund using Securities as
collateral;
(f) The legality of any loan of portfolio Securities pursuant to Article
XI of this Agreement, nor shall the Custodian be under any duty or obligation to
see to it that any cash collateral delivered to it by a broker, dealer or
financial institution or held by it at any time as a result of such loan of
portfolio Securities of a Fund is adequate collateral for a Fund against any
loss it might sustain as a result of such loan. The Custodian specifically, but
not by way of limitation, shall not be under any duty or obligation periodically
to check or notify a Fund that the amount of such cash collateral held by it for
a Fund is sufficient collateral for a Fund, but such duty or obligation shall be
the sole responsibility of a Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of a Fund are lent pursuant to Article XI of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of a Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify a Fund in the event that such dividends or interest are not paid and
received when due; or
(g) The sufficiency or value of any amounts of money and/or Securities
held in any Margin Account, Segregated Security Account or Collateral Account in
connection with transactions by a Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer, or Clearing
11
<PAGE>
Member makes payment to a Fund of any variation margin payment or similar
payment which a Fund may be entitled to receive from such broker, dealer, or
Clearing Member, to see that any payment received by the Custodian from any
broker, dealer, or Clearing Member is the amount a Fund is entitled to receive,
or to notify a Fund of the Custodian's receipt or non-receipt of any such
payment; provided however that the Custodian, upon a Fund's written request,
shall as Custodian, demand from any broker, dealer, or Clearing Member
identified by a Fund the payment of any variation margin payment or similar
payment that a Fund asserts it is entitled to receive pursuant to the terms of a
Margin Account Agreement or otherwise from such broker, dealer, or Clearing
Member.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft or other
instrument for the payment of money, received by it on behalf of a Fund until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing a Fund's interest at the Book-Entry System
or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchanges, offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
a Fund of an overdue amount on Securities held in the Depository, the Custodian
shall make a claim against the Depository on behalf of a Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to a Fund from the Transfer Agent
of a Fund nor to take any action to effect payment or distribution by the
Transfer Agent of a Fund of any amount paid by the Custodian to the Transfer
Agent of a Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may appoint one or more banking institutions as
Depository or Depositories or as sub-custodian(s), including, but not limited
to, banking institutions located in foreign countries, of Securities and moneys
at any time owned by a Fund, upon terms and conditions approved in a
Certificate, which shall, if requested by the Custodian, be accompanied by an
approving resolution of the Company's Board of Directors adopted in accordance
with Rule 17f-5 under the Investment Company Act of 1940, as amended.
8. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
a Fund are such as properly may be held by a Fund under the provisions of its
Articles of Incorporation.
12
<PAGE>
9. The Custodian shall be entitled to receive and each Fund agrees to
pay to the Custodian all out-of-pocket expenses and fees as set forth in
Appendix D attached hereto. The Custodian may charge such fees and any expenses
incurred by the Custodian in the performance of its duties against any money
held by it for the account of a Fund. The Custodian shall also be entitled to
charge against any money held by it for the account of a Fund the amount of any
loss, damage, liability or expense, including attorney's fees, for which it
shall be entitled to reimbursement under the provisions of this Agreement. The
expense which the Custodian may charge against the account of a Fund include,
but are not limited to, the expenses of Sub-Custodians of the Custodian incurred
in settling outside of New York City transactions involving the purchase and
sale of Securities of a Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a Certificate. The Custodian shall be entitled to rely
upon any Oral Instructions and any Written Instructions actually received by the
Custodian pursuant to Article IV or VII hereof. A Fund agrees to forward to the
Custodian a Certificate or facsimile thereof, confirming such Oral Instructions
or Written Instructions in such manner so that such Certificate or facsimile
thereof is received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day that such Oral Instructions
or Written Instructions are given to the Custodian. A Fund agrees that the fact
that such confirming instructions are not received by the Custodian shall in no
way affect the validity of the transactions hereby authorized by a Fund. A Fund
agrees that the Custodian shall incur no liability to a Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions,
provided such instructions reasonably appear to have been received from an
Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, or Clearing Member.
12. The books and records pertaining to a Fund which are in the
possession of the Custodian shall be the property of a Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws, rules and
regulations. A Fund, or a Fund's authorized representative(s), shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of a Fund, copies of any such books and records
shall be provided by the Custodian to a Fund or a Fund's authorized
representative(s) at a Fund's expense.
13. The Custodian shall provide the Company with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System or the Depository and with such reports on its own systems of internal
accounting control as the Company may reasonably request from time to time.
14. A Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with the Custodian's payment or non-payment of checks pursuant to
paragraph 6 of Article IX as part of any check redemption privilege program of a
Fund, except for any such liability, claim, loss and demand arising out of the
Custodian's own negligence or willful misconduct.
13
<PAGE>
15. Subject to the foregoing provisions of this Agreement, the Custodian
may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the Custodian in
accordance with the customs prevailing from time to time among brokers or
dealers in such Securities.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement or Appendix D attached hereto, and no covenant or obligation shall be
implied in this Agreement against the Custodian.
ARTICLE XIII
TERMINATION
1. This Agreement shall continue until January 1998, and thereafter
shall continue automatically for successive annual periods ending on the last
day of December of each year, provided such continuance is specifically approved
at least annually by (i) the Company's Directors or (ii) vote of a majority (as
defined in the Investment Company Act of 1940) of a Fund's outstanding voting
securities, provided that in either event its continuance also is approved by a
majority of the Company's Directors who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable
without penalty, on sixty (60) days' notice, by the Company's Directors or, by
vote of holders of a majority of a Fund's Shares or, upon not less than ninety
(90) days' notice, by the Custodian. In the event such notice is given by a
Fund, it shall be accompanied by a copy of a resolution of the Directors of the
Company on behalf of a Fund, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. In
the event such notice is given by the Custodian, a Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the
Directors, certified by the Secretary or any Assistant Secretary, designating a
successor custodian or custodians. In the absence of such designation by a
Fund, the Custodian may designate a successor custodian which shall be a bank or
trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice, this Agreement shall
terminate and the Custodian shall, upon receipt of a notice of acceptance by the
successor custodian, on that date deliver directly to the successor custodian
all Securities and moneys then owned by a Fund and held by it as Custodian,
after deducting all fees, expenses, and other amounts for the payment of
reimbursement of which shall then be entitled.
2. If a successor custodian is not designated by the Company on behalf
of a Fund or the Custodian in accordance with the preceding paragraph, a Fund
shall, upon the date specified in the notice of termination of this Agreement
and upon the delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to a Fund) and moneys
then owned by a Fund, be deemed to be its own custodian, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System, in any Depository or by a Clearing Member which cannot be delivered to a
Fund, to hold such Securities hereunder in accordance with this Agreement.
14
<PAGE>
ARTICLE XIV
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Company under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Company agrees to furnish to
the Custodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered Certificate.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Company under its seal, setting forth the names and the
signatures of the present Officers of the Company. A Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Company, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be fully be protected in acting under the
provisions of this Agreement upon the signatures of the Officers as set forth in
the last delivered Certificate.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be deemed sufficiently given
if addressed to the Custodian and mailed or delivered to it at its offices at
420 Montgomery Street, San Francisco, California, 94105, or at such other place
as the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given by or on behalf of a Fund, shall be deemed
sufficiently given if addressed to a Fund and mailed or delivered to it at its
office at 111 Center Street, Little Rock, Arkansas, 72201, or at such other
place as a Fund may from time to time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties to this Agreement and approved by a
resolution of the Directors of the Company.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successor(s) and assign(s); provided, however, that
this Agreement shall not be assignable by the Company without the written
consent of the Custodian, or by the Custodian without the written consent of the
Company, authorized or approved by a resolution of its Directors.
7. This Agreement shall be construed in accordance with the laws of the
State of California without giving effect to the choice of law provisions
thereof.
15
<PAGE>
8. This Agreement may be executed in any number of counterparts, each
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized, as of the day
and year first above written.
STAGECOACH FUNDS, INC. BARCLAYS GLOBAL INVESTORS, N.A.
By: ____________________ By: ______________________
Name: Richard H. Blank, Jr. Name: ____________________
Title: Chief Operating Officer Title: ___________________
By: ______________________
Name: ____________________
Title: ___________________
16
<PAGE>
APPENDIX A
----------
AUTHORIZED PERSONS
Pursuant to Article I, Para. 1, and Article XIV, Para. 1, of the
Custody Agreement, the following persons have been authorized by the Board of
Directors to give Oral Instructions and Written Instructions on behalf of a
Fund.
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
By: ________________________
Name: ______________________
Title: _____________________
-A-
<PAGE>
APPENDIX B
----------
OFFICERS
Pursuant to Article I, Para. 8, and Article XIV, Para. 2, of the
Custody Agreement, the term "Officers" does not include any persons other than
the President, Vice President, Secretary, Treasurer, Controller, Assistant
Secretary and Assistant Treasurer; and the following persons are Officers of the
Company authorized by the Board of Directors to execute any Certificate,
instruction, notice or other instrument on behalf of a Fund.
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
Signature: ____________________________
Name: _________________________________
By: _____________________ By: _______________________
Name: _____________________ Name: _______________________
Title: _____________________ Title: : _______________________
-B-
<PAGE>
APPENDIX C
----------
DESIGNATED PUBLICATIONS LIST FOR CALLED INSTRUMENTS
The following publications are designated publications for the purposes
of Article III, Para. 5(b):
A. The Bond Buyer
B. The Depository Trust Company Notices
C. Financial Daily Card Services
D. The New York Times
E. Standard & Poor's Called Bond Record
F. The Wall Street Journal
-C-
<PAGE>
APPENDIX D
----------
CUSTODY FEES
Net Asset Charge 0.0167% (1.67 bps) annually
Transaction Charges:
Depository Eligible $10.00 ea.
Physical Delivery $20.00 ea.
Principal & Interest Paydown $10.00 ea.
Sweeps $-0-
PORTFOLIO ACCOUNTING
Monthly Base Fee $2,000.00
Net Asset Charge:
First $50,000,000 Net Assets 0.070% (7.0 bps) annually
Next $50,000,000 Net Assets 0.045% (4.5 bps) annually
Net Assets Over $100,000,000 0.020% (2.0 bps) annually
-D-
<PAGE>
APPENDIX E
----------
COMPANY AND FUND ACCOUNTING SERVICES:
Schedule of Services
A. Maintain Fund general ledger and journal.
B. Prepare and record disbursements for direct Fund expenses.
C. Prepare daily money transfers.
D. Reconcile all Fund bank and custodian accounts.
E. Assist Fund independent auditors as appropriate.
F. Prepare daily projection of available cash balances.
G. Record trading activity for purposes of determining net asset values and
daily dividend.
H. Prepare daily portfolio evaluation report to value portfolio Securities and
determine daily accrued income.
I. Determine the daily net asset value per share.
J. Determine the daily dividend per share.
K. Prepare monthly, quarterly, semi-annual and annual financial statements.
L. Provide financial information for reports to the Securities and Exchange
Commission in compliance with the provisions of the Investment Company Act
of 1940 and the Securities Act of 1933, the Internal Revenue Service and
any other regulatory or governmental agencies as required.
M. Provide financial, yield, net asset value, etc., information to National
Association of Securities Dealers, Inc., and other survey and statistical
agencies as instructed from time to time by a Fund.
-E-
<PAGE>
APPENDIX F
----------
Index Allocation Fund
Approved October 30, 1997
-F-
<PAGE>
CUSTODY AGREEMENT
between
STAGECOACH FUNDS, INC.
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Bank Appointed Custodian..................................... 1
2. Definitions.................................................. 1
2.1 Authorized Person..................................... 1
2.2 Board 1
2.3 Security 1
2.4 Portfolio Security.................................... 1
2.5 Officer's Certificate................................. 2
2.6 Book-Entry System..................................... 2
2.7 Depository............................................ 2
2.8 Proper Instructions................................... 2
2.9 Foreign Securities.................................... 2
3. Separate Accounts............................................ 2
4. Certification as to Authorized Persons....................... 3
5. Custody of Cash.............................................. 3
5.1 Purchase of Securities................................ 3
5.2 Redemptions........................................... 3
5.3 Distributions and Expenses of the Fund................ 4
5.4 Payment in Respect of Securities...................... 4
5.5 Repayment of Loans.................................... 4
5.6 Repayment of Cash..................................... 4
5.7 Foreign Exchange Transactions......................... 4
5.8 Other Authorized Payments............................. 4
5.9 Termination........................................... 4
6. Securities................................................... 5
6.1 Segregation and Registration.......................... 5
6.2 Voting and Proxies.................................... 5
6.3 Corporate Action...................................... 5
6.4 Book-Entry System..................................... 6
6.5 Use of a Depository................................... 7
6.6 Use of Book-Entry System for Commercial Paper......... 9
6.7 Use of Immobilization Programs........................ 9
6.8 Eurodollar CDs........................................ 10
6.9 Options and Futures Transactions...................... 10
6.10 Segregated Account.................................... 11
6.11 Interest Bearing Call or Time Deposits................ 12
6.12 Transfer of Securities................................ 12
7. Redemptions.................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8. Merger, Dissolution, etc. of the Company or the Fund......... 14
9. Actions of the Bank Without Prior Authorization.............. 15
10. Collections and Defaults..................................... 15
11. Maintenance of Records and Accounting Services............... 16
12. [Reserved]
13. Concerning the Bank.......................................... 16
13.1 Bank Warranty......................................... 16
13.2 Standard of Care and Performance of Duties............ 16
13.3 Agents and Sub-custodians with Respect to Property
of the Fund Held in the United States................. 18
13.4 Duties of the Bank with Respect to Property
Held Outside of the United States..................... 18
13.5 Insurance............................................. 20
13.6 Compensation and Reimbursement of Expenses............ 20
13.7 Advances by Bank...................................... 21
14. Termination.................................................. 21
15. Confidentiality.............................................. 22
16. Notices...................................................... 23
17. Amendments................................................... 23
18. Parties...................................................... 23
19. Governing Law................................................ 24
20. Counterparts................................................. 24
21. Limitations of Liability..................................... 24
22. Single Agreement............................................. 24
</TABLE>
ii
<PAGE>
CUSTODY AGREEMENT
AGREEMENT made as of this 22nd day of September, 1997, between
STAGECOACH FUNDS, INC., a Maryland corporation (the "Company"), and INVESTORS
BANK & TRUST COMPANY (the "Bank" or, "IBT").
The Company, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of the
International Equity Fund (the "Fund"), desires to place and maintain all of the
Fund's portfolio securities and other assets including cash in the custody of
the Bank, and the Bank has indicated its willingness to so act, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Company hereby appoints the Bank as
------------------------
custodian of the Fund's portfolio securities and cash delivered to the Bank as
hereinafter described, and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have
-----------
the following meanings:
2.1 Authorized Person. Authorized Person will mean any of the persons
-----------------
duly authorized to give Proper Instructions or otherwise act on behalf of the
Company and the Fund by appropriate resolution of the Board of Directors of the
Company, and set forth in a certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Company's Board of Directors.
-----
2.3 Security. The term security as used herein will have the same
--------
meaning as when such term is used in the Securities Act of 1933, as amended (the
"1933 Act"), including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit, or
group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to a foreign currency, or, in general,
any interest or instrument commonly known as a "security", or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures, forward contracts and
options thereon.
1
<PAGE>
2.4 Portfolio Security. Portfolio Security will mean any security
------------------
owned by the Fund.
2.5 Officer's Certificate. Officer's Certificate will mean, unless
---------------------
otherwise indicated, any request, direction, instruction, or certification in
writing signed by an Authorized Person of the Company.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
-----------------
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor(s) and its nominee(s) and any other book entry system approved by the
Board.
2.7 Depository. Depository shall mean The Depository Trust Company
----------
("DTC") and any other clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and its successor(s) and its nominee(s). The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor(s) and its nominee(s),
specifically identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
-------------------
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the
Company shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Company shall cause all oral instructions to be promptly confirmed in
writing or by facsimile. The Bank shall act upon and comply with any subsequent
Proper Instruction which modifies a prior instruction, and the sole obligation
of the Bank with respect to any follow-up or confirmatory instruction shall be
to make reasonable efforts to detect any discrepancy between the original
instruction and such confirmation and to report such discrepancy to the Company.
The Company shall be responsible, at the expense of the Fund, for taking any
action, including any reprocessing, necessary to correct any such discrepancy or
error, and, to the extent such action requires the Bank to act, the Company
shall give the Bank specific Proper Instructions as to the action required.
Upon receipt by the Bank of an Officer's Certificate as to the authorization by
the Board accompanied by a detailed description of procedures approved by the
Company, Proper Instructions may include communication effected directly between
electromechanical or electronic devices provided that the Company and the Bank
are satisfied that such procedures afford adequate safeguards for the Fund's
assets.
2.9 Foreign Securities. The term Foreign Securities as used herein
------------------
will have the same meaning as when such term is used in Rule 17f-5 under the
1940 Act.
3. Separate Accounts. The Bank will segregate the assets of the Fund into
-----------------
a separate account for the Fund containing the assets of the Fund (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken
2
<PAGE>
by the Company shall be deemed to refer to the Company acting on behalf of the
Fund, any reference in this Agreement to any assets of the Company, including,
without limitation, any Portfolio Securities and other assets including cash and
any earnings thereon, shall be deemed to refer only to assets of the Fund, any
duty or obligation of the Bank hereunder to the Company shall be deemed to refer
to duties and obligations with respect to the Fund, and any obligation or
liability of the Company hereunder shall be binding only with respect to the
Fund and shall be discharged only out of the assets of the Fund.
4. Certification as to Authorized Persons. The Secretary or an Assistant
--------------------------------------
Secretary of the Company will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or an
Assistant Secretary of the Company, will sign a new or amended certification
setting forth the change of the new, additional or omitted names or signatures.
The Bank will be entitled to rely and act upon any Officer's Certificate given
to it by the Company that has been signed by Authorized Persons named in the
most recent certification received by the Bank.
5. Custody of Cash. As custodian, the Bank will open and maintain a
---------------
separate account or accounts in the name of the Fund or in the name of the Bank
as custodian of the Fund, and will deposit to the account of the Fund all of the
cash of the Fund, except for cash held by a sub-custodian appointed pursuant to
subsections 13.3 or 13.4 hereof, including borrowed funds, delivered to the
Bank, subject only to draft or order by the Bank acting pursuant to the terms of
this Agreement. Upon receipt by the Bank of Proper Instructions (which may be
continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding interests of the Fund, notification from the Fund's
transfer agent as provided in Section 7, requesting such payment, designating
the payee or the account or accounts to which the Bank will release funds for
deposit, and stating that it is for a purpose permitted under the terms of this
Section 5, specifying the applicable subsection, the Bank will make payments of
cash held for the accounts of the Fund, insofar as funds are available for that
purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
----------------------
Fund, against contemporaneous receipt of such securities by the Bank, or against
delivery of such securities to the Bank, in accordance with generally accepted
settlement practices or customs in the jurisdiction or market in which the
transaction occurs, such securities to be registered in the name of the Fund or
in the name of, or properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank pursuant to the
provisions of Section 6 below, each such payment to be made at the purchase
price shown on a broker's confirmation (or transaction report in the case of
Book Entry Paper) of purchase of the securities that is received by the Bank
before such payment is made and that has been confirmed in the Proper
Instructions also received by the Bank before such payment is made.
3
<PAGE>
5.2 Redemptions. In such amount as may be necessary for the
-----------
repurchase or redemption of interests of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of the Fund. For the payment on the
--------------------------------------
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, investment advisory
or administration fees, and, as and to the extent provided on Schedule A hereto,
any fees of the Bank for its services hereunder and any reimbursement of the
expenses and liabilities of the Bank related to such services with respect to
the Fund of the Company as provided pursuant to subsection 13.6 hereunder and on
Schedule A hereto.
5.4 Payment in Respect of Securities. For payments in connection with
--------------------------------
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund,
------------------
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
-----------------
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
-----------------------------
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery ("Foreign Exchange Agreements") that may be entered
into by the Bank on behalf of the Fund upon the receipt of Proper Instructions,
such Proper Instructions to specify the currency broker or banking institution
(which may be the Bank, or any other sub-custodian or agent hereunder, acting as
principal) with which the contract or option is made, and the Bank shall have no
duty with respect to the selection of such currency brokers or banking
institutions with which the Fund deals or for their failure to comply with the
terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of
-------------------------
the Fund, or other obligations of the Fund incurred for proper purposes with
respect to the Fund; provided that before making any such payment, the Bank also
will receive Proper Instructions or a certified copy of a resolution of the
Board signed by an Authorized Person (other than the Person certifying such
resolution) and certified by its Secretary or Assistant Secretary, naming the
person or persons to whom such payment is to be made, and either describing the
transaction for which payment is to be made and declaring it to be an authorized
transaction of the Fund, or specifying the amount of the obligation for which
payment is to be made, setting forth the purpose for which such obligation was
incurred and declaring such purpose to be a proper corporate purpose.
4
<PAGE>
5.9 Termination. Upon the termination of this Agreement as
-----------
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
----------
6.1 Segregation and Registration. Except as otherwise provided
----------------------------
herein, and except for Portfolio Securities to be delivered to any sub-custodian
appointed pursuant to subsections 13.2 or 13.3 hereof, the Bank as custodian,
will receive and hold pursuant to the provisions hereof, in a separate account
or accounts and physically segregated at all times from those of other persons,
any and all Portfolio Securities which may now or hereafter be delivered to it
by or for the account of the Fund. All such Portfolio Securities will be held
or disposed of by the Bank for, and subject at all times to, the instructions of
the Company pursuant to the terms of this Agreement. Subject to the specific
provisions herein relating to Portfolio Securities that are not physically held
by the Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officer's Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by such
laws or regulations or under the laws of any state. The Bank will use its best
efforts to the end that the specific Portfolio Securities held by it hereunder
will be at all times identifiable.
The Company, on behalf of the Fund, will from time to time furnish to
the Bank appropriate instruments to enable it to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee, any
Portfolio Securities which may from time to time be registered in the name of
the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
------------------
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or will cause to be executed and delivered, to the Company or its
designated agent all notices, proxies and proxy soliciting materials with
respect to such Portfolio Securities, but without indicating the manner in which
such proxies are to be voted, such proxy to be executed by the registered holder
of such Portfolio Securities (if registered otherwise than in the name of the
Fund), in accordance with the Proper Instructions or an Officer's Certificate.
6.3 Corporate Action. If at any time the Bank is notified that an
----------------
issuer of a Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of the Portfolio Security, including, without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Company's designee, Wells Fargo Bank, N.A. ("Wells Fargo Bank"),
promptly of the Corporate Action, the Response required in connection with the
Corporate Action, and the Bank's deadline for receipt from the Company's
designee, Wells Fargo Bank, of Proper Instructions regarding the Response (the
"Response
5
<PAGE>
Deadline"). Except as provided in subsection 6.3(c) below, the date specified as
the Response Deadline shall not be more than 24 hours prior to the Response
expiration day set by the depository processing such Corporate Action. The Bank
shall forward to the Company's designee, Wells Fargo Bank, via facsimile and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action within twenty-four (24) hours of receipt of
such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Company's designee, Wells
Fargo Bank, no later than 4:00 p.m. (Pacific time) on the date specified as the
Response Deadline and only if the Bank (or its agent or sub-custodian hereunder)
has actual possession of all Portfolio Securities (but only if such Portfolio
Securities are necessary for the consummation of the Corporate Action
("Necessary Portfolio Securities")), consents and other materials no later than
4:00 p.m. (Pacific time) on the date specified as the Response Deadline.
Portfolio Securities in the possession of a broker or other borrower pursuant to
the Bank's securities lending program shall be deemed to be in the possession of
the Bank for the purposes of this subsection 6.3.
(b) The Bank shall have no duty to act upon a required Response
if Proper Instructions relating to such Response and all Necessary Portfolio
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 4:00 p.m. (Pacific time) on the date
specified as the Response Deadline. Notwithstanding, the Bank may, in its sole
discretion, use its best efforts to act upon a Response for which Proper
Instructions and/or Necessary Portfolio Securities, consents or other materials
are received by the Bank after 4:00 p.m. (Pacific time) on the date specified as
the Response Deadline, it being acknowledged and agreed by the parties that any
undertaking by the Bank to use its best efforts in such circumstances shall in
no way create any duty upon the Bank to complete such Response prior to its
expiration.
(c) In the event that the Company's designee, Wells Fargo Bank,
notifies the Bank of a Corporate Action requiring a Response and the Bank has
received no other notice of such Corporate Action, the Response Deadline shall
be 48 hours prior to the Response expiration time set by the depository
processing such Corporate Action.
(d) Subsection 13.4(g) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
-----------------
certified copy of a resolution of the Board specifically approving deposits of
the Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officers Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or
6
<PAGE>
its agent) in such System that shall not include any assets of the Bank (or such
agent) other than assets held as a fiduciary, custodian, or otherwise for
customers:
(b) The records of the Bank (and any such agent) with respect to
the Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities that are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Company. Where securities
are transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of Portfolio Securities
in a fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer Portfolio Securities sold or loaned for the account of the Fund
upon:
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of Portfolio Securities loaned by the Fund has been transferred to
the Account: and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of Portfolio
Securities for the account of the Fund shall identify the Fund, be maintained
for the Fund by the Bank and shall be provided to the Fund at its request. The
Bank shall send the Fund a confirmation, in accordance with Rule 17f-4 under the
1940 Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Company with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) The Bank shall be liable to the Company and the Fund for any
loss or damage to the Fund resulting from use of the Book-Entry System by reason
of any negligent actions or inactions of the Bank or any of its agents or of any
of its or their employees, or from any failure by the Bank or any such agent to
use its best efforts to enforce such rights as it may have against the Book-
Entry System; at the election of the Fund, it shall be entitled to be subrogated
for the Bank in any claim against the Book-Entry System or any other person that
the Bank or its agent may have as a consequence of any such loss or damage if
and to the extent that the Fund has not been made whole for any loss or damage;
6.5 Use of a Depository. Provided (i) the Bank has received a
-------------------
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii)
7
<PAGE>
for any subsequent changes to such arrangements following such approval, the
Board has reviewed and approved the arrangement and has not delivered an
Officer's Certificate to the Bank indicating that the Board has withdrawn its
approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name
of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account of
the Fund; and upon any sale of Portfolio Securities, delivery of the Securities
will be made only against payment thereof or, in the event Portfolio Securities
are loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
(d) The Bank shall be liable to the Fund for any loss or damage to
the Fund resulting from use of a Depository by reason of any negligent actions
or inactions of the Bank or its employees or from any failure by the Bank to use
its best efforts to enforce such rights as it may have against a Depository. In
this connection, the Bank shall use its best efforts to ensure that:
(i) the Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) any proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for voting in accordance with subsection 6.2 above;
(iii) such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
8
<PAGE>
(v) such Depository delivers to the Bank and the Company all
internal accounting control reports, whether or not audited by an independent
public accountant, as well as such other reports as the Company may reasonably
request in order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the
---------------------------------------------
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a book-
entry agreement (the "Issuers"). In maintaining its procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Fund
in an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Fund's purchase
of Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund that is included in the Book-Entry Paper system and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Company;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon
the maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) The Bank shall transmit to the Company a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction: and
(f) The Bank will send to the Company such reports on its system
of internal accounting control with respect to Book-Entry Paper as the Company
may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
------------------------------
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has
9
<PAGE>
reviewed and approved the arrangement and has not delivered an Officer's
Certificate to the Bank indicating that the Board has withdrawn its approval,
the Bank shall enter into such immobilization program with such bank acting as a
sub-custodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities that are Eurodollar CDs
--------------
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to the Fund and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund, and the Bank shall have no liability to
the Fund or its interestholders with respect to the actions, inactions, whether
negligent or otherwise of such European Branch in connection with such
Eurodollar CDs, except for any loss or damage to the Fund resulting from the
Bank's own negligent actions or inactions or lack of reasonable care in the
performance of its duties hereunder.
6.9 Options and Futures Transactions.
--------------------------------
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund regarding
escrow or other arrangements in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any broker-
dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Company, on behalf of the Fund, relating to the compliance with the rules of the
Options Clearing Corporation and of any registered national securities exchange,
or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Company.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.10 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (1) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker or the Fund against any
loss; (2) effect the return of any collateral delivered to a broker; or (3)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of a Company.
10
<PAGE>
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action, upon receipt of Proper
Instructions, as to puts, calls and futures contracts ("futures") purchased or
sold by the Fund in accordance with the provisions of any agreement among the
Company, on behalf of the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization(s), regarding account deposits in connection with
transactions by the Fund.
(ii) The responsibilities and liabilities of the Bank as
to futures, puts and calls traded on commodities exchanges, any Futures
Commission Merchant account and the Segregated Account shall be limited as set
forth in subparagraph (a)(ii) of this subsection 6.9 as if such subparagraph
referred to Futures Commission Merchants rather than brokers, and futures and
puts and calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
------------------
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions, cash and/or Portfolio Securities.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account in the following circumstances, upon receipt of Proper
Instructions:
(i) in accordance with the provisions of any agreement
among the Company, on behalf of the Fund, the Bank and a broker-dealer
registered under the Exchange Act and a member of the NASD or any Futures
Commission Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar organizations
regarding escrow or other arrangements in connection with transactions by the
Fund;
(ii) for the purpose of segregating cash or Securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(iii) for the deposit of liquid assets, including, but not
limited to cash, U.S. Government obligations or other high-grade debt
obligations, having a market value (marked-to-market on a daily basis) at all
times equal to not less than the aggregate purchase price due on the settlement
dates of all the Fund's then outstanding forward commitment or "when-issued
agreements" relating to the purchase of Portfolio Securities and all the Fund's
then outstanding commitments under any reverse repurchase agreements entered
into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases
11
<PAGE>
of the Securities and Exchange Commission or no-action positions taken by the
staff of the Securities and Exchange Commission relating to the maintenance of
Segregated Accounts by registered investment companies; or
(v) for other proper corporate purposes, but only, in the
case of this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee,
signed by an officer of the Company and certified by the Secretary or an
Assistant Secretary, setting forth the purpose(s) of such Segregated Account and
declaring such purpose(s) to be a proper corporate purpose(s).
(b) assets may be withdrawn from the Segregated Account pursuant
to Proper Instructions only:
(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii)
or (a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward-commitment, delayed-settlement or when-issued agreements for
the purchase of Portfolio Securities and under reverse repurchase agreements, or
for release back into the Fund's Portfolio Securities account upon receipt of
Proper Instructions specifying that the value of the assets in the Segregated
Account or Accounts exceeds the amount required to ensure compliance with the
procedures described in (a)(iv), above;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward-
commitment or when-issued agreements for the purchase of portfolio securities or
any reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in the
Segregated Account;
(v) for delivery upon settlement of a forward-commitment,
delayed-settlement or when-issued agreement for the sale of Portfolio
Securities; or
(vi) with respect to assets deposited pursuant to (a)(v)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
--------------------------------------
receipt of Proper Instructions relating to the purchase by the Fund of interest-
bearing fixed-term and call deposits, transfer cash, by wire or otherwise, in
such amounts and to such bank(s) as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit
12
<PAGE>
Bank. Such deposits shall be deemed Portfolio Securities of the Fund and the
responsibility of the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio Securities of the Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange,
----------------------
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section, the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this subsection
6.12, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only:
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
or against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions received by
the Bank before such payment is made;
(b) in exchange for, or upon conversion into, other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or sub-custodian hereunder) has actual possession
of such Portfolio Security at least two business days prior to the date of
tender
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind interests of the Fund
upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank;
13
<PAGE>
provided, however, that such Securities will be released only upon payment to
the Bank for the account of the Fund of the moneys borrowed, except that in
cases where additional collateral is required to secure a borrowing already
made, and such fact is made to appear in the Proper Instructions, further
Portfolio Securities may be released for that purpose without any such payment.
In the event that any such pledged Portfolio Securities are held by the Bank,
they will be so held for the account of the lender, and after notice to the Fund
from the lender in accordance with the normal procedures of the lender, that an
event of deficiency or default on the loan has occurred, the Bank may deliver
such pledged Portfolio Securities to or for the account of the lender,
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering Portfolio Securities lent by
the Fund to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise provided herein, of adequate
collateral as agreed upon from time to time by the Fund and the Bank, and upon
receipt of payment in connection with any repurchase agreement relating to such
Securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Company (other than the officer certifying such
resolution) and certified by its Secretary or an Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such Securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
-----------
Bank in connection with redemptions and repurchases by the Fund of outstanding
interests, the Bank will rely on notification by the Company's transfer agent of
receipt of a request for redemption before such payment is made. Payment shall
be made in accordance with the Declaration of Trust (the "Declaration") of the
Company, from assets available for said purpose.
8. Merger, Dissolution, etc. of the Company or the Fund. In the case of
----------------------------------------------------
the following transactions, not in the ordinary course of business, namely, the
merger of the Fund into or the consolidation of the Company with another
investment company, the sale by the Company of all, or substantially all, of the
assets of one or more Funds to another investment company, or the liquidation or
dissolution of the Fund and distribution of its assets, the Bank will deliver
the
14
<PAGE>
Portfolio Securities held by it under this Agreement and disburse cash only
upon the order of the Company, on behalf of the Fund, accompanied by a certified
copy of a resolution of the Board authorizing any of the foregoing transactions.
Upon completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate with
respect to the Fund or Company, as applicable.
9. Actions of the Bank Without Prior Authorization. Notwithstanding
-----------------------------------------------
anything herein to the contrary, unless and until the Bank receives an Officer's
Certificate to the contrary, it will without prior authorization or instruction
of the Company or the transfer agent:
(a) endorse for collection and collect on behalf of and in the
name of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income, dividends,
interest and other payments or distributions of cash with respect to the
Portfolio Securities held thereunder;
(b) present for payment all coupons and other income items held
by it for the account of the Fund that call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Fund;
(c) receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
(d) execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
(e) present for payment all Portfolio Securities that are
called, redeemed, retired or otherwise become payable, and hold cash received by
it upon payment for the account of the Fund; and
(f) exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
------------------------
collect any funds that may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Company, on behalf of the Fund, notice actually received by the
Bank of any call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such Portfolio Securities. If
Portfolio
15
<PAGE>
Securities upon which such income is payable are in default or payment is
refused after due demand or presentation, the Bank will notify the Company, on
behalf of the Fund, in writing of any default or refusal to pay within two
business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Company a written report once each
month showing any income on any Portfolio Security held by Bank on behalf of the
Fund that is more than ten days overdue on the date of such report.
11. Maintenance of Records and Accounting Services. The Bank will
----------------------------------------------
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations under the 1940 Act and will furnish the
Company daily with a statement of condition of the Fund. The Bank will furnish
to the Company at the end of every month, and at the close of each quarter of
the Company's fiscal year, a list of the Portfolio Securities and the aggregate
amount of cash held by Bank on behalf of the Fund. The books and records of the
Bank pertaining to its actions under this Agreement and reports by the Bank or
its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Company and will be preserved by the Bank in the manner and in accordance
with the applicable rules and regulations under the 1940 Act.
12. [Reserved]
13. Concerning the Bank.
-------------------
13.1 Bank Warranty. The Bank warrants that it has and will maintain
-------------
at least the minimum qualifications required by Section 17(f)(1) of the 1940 Act
to act as custodian of the Portfolio Securities and other assets including cash
of the Fund.
13.2 Standard of Care and Performance of Duties.
------------------------------------------
(a) The Bank agrees to use reasonable care with regard to its
obligations under this Agreement and the safekeeping of property of the Fund.
In performing its duties hereunder and any other duties listed on the Schedules
hereto, the Bank will be entitled to receive and act upon the advice of
independent counsel of its own selection, which may be counsel for the Company,
and the Bank will be without liability for any action taken or thing done, or
omitted to be done, so long as the Bank's actions or inactions are without
negligence and in accordance with this Agreement in good faith in conformity
with such advice. The Bank shall be liable to, and shall indemnify and hold
harmless the Company from and against any loss which shall occur as the result
of the failure of the Bank or a sub-custodian (other than a foreign securities
depository or clearing agency and except as provided in subsections 6.8, 13.2
and 13.3(i) hereof) to exercise reasonable care with respect to their respective
obligations under this Agreement and the safekeeping of such property. Subject
to the foregoing, the Bank will not be responsible for any act, omission,
default or for the solvency of any foreign securities depository or clearing
agency utilized in connection with the provision of services under this
Agreement.
16
<PAGE>
(b) In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless for any
action taken or omitted to be taken by it with reasonable care and in good faith
reliance upon the terms of this Agreement, any Officer's Certificate, Proper
Instructions, resolution of the Board, facsimile, telegram, notice, request,
certificate or other instrument reasonably believed by the Bank to be genuine
and for any other loss to the Fund except in the case of its negligent actions
or inactions or lack of good faith or reasonable care in the performance of its
obligations or duties hereunder.
(c) The Bank will be under no duty or obligation to inquire into
and will not be liable for:
(i) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(ii) the legality of any sale of any Portfolio Securities
by or for the Fund or the propriety of the amount for which the same are sold;
(iii) the legality of an issue or sale of any interests of
the Fund or the sufficiency of the amount to be received therefor;
(iv) the legality of the repurchase of any interests of
the Fund or the propriety of the amount to be paid therefor;
(v) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any Portfolio Securities as
payment in kind of such dividend; and
(vi) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
(d) Moreover, the Bank will not be under any duty or obligation
to ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Company Articles, By-Laws, any federal or state
statutes or any rule or regulation of any governmental agency.
(e) Notwithstanding anything in this Agreement to the contrary,
in no event shall the Bank be liable hereunder or to any third party:
(i) for any losses or damages of any kind resulting from
acts of God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of utilities,
transportation, or computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events, except
as results from the Bank's own negligence, provided that the Bank shall make all
reasonable efforts, whenever necessary, to use data processing back-up
facilities provided by Electronic Data Systems, Inc.; or
17
<PAGE>
(ii) for special, punitive or consequential damages
arising from the provision of services hereunder, even if the Bank has been
advised of the possibility of such damages.
(f) The Bank need not maintain any insurance for the exclusive
benefit of the Company, but hereby warrants that as of the date of this
Agreement it is maintaining a bankers Blanket Bond and hereby agrees to notify
the Company in the event that such bond is canceled or otherwise lapses.
13.3 Agents and Sub-custodians with Respect to Property of the Fund
--------------------------------------------------------------
Held in the United States. The Bank may employ agents in the performance of its
- -------------------------
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ sub-custodians,
provided that any such sub-custodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Company or any other person by reason of any act
or omission of any sub-custodian and the Company shall indemnify the Bank and
hold it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any sub-custodian. Upon
request of the Bank, the Company shall assume the entire defense of any action,
suit, or claim subject to the foregoing indemnity. All fees and expenses of any
sub-custodian shall be paid by the Bank.
13.4 Duties of the Bank with Respect to Property of the Fund Held
------------------------------------------------------------
Outside of the United States.
- ----------------------------
(a) Appointment of Foreign Sub-custodians. The Company hereby
-------------------------------------
authorizes and instructs the Bank to employ as sub-custodians for the Company's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated by
the Board or by the Bank as Foreign Custody Manager, or any other Foreign
Custody Manager approved by the Board (each, a "Selected Foreign Sub-
custodian"). Upon receipt of Proper Instructions, together with a certified
resolution of the Company's Board of Directors or such Foreign Custody Manager,
the Bank and the Company may agree to designate additional foreign banking
institutions and foreign securities depositories to act as Selected Foreign Sub-
custodians hereunder. Upon receipt of Proper Instructions, the Company or such
Foreign Custody Manager may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise
-------------------------------
be agreed upon in writing by the Bank and the Company, assets of the Fund shall
be maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign Sub-
custodians pursuant to the terms hereof. Where
18
<PAGE>
possible, such arrangements shall include entry into agreements containing the
provisions set forth in subparagraph (d) hereof.
(c) Segregation of Securities. The Bank shall identify on its
-------------------------
books as belonging to the Fund the Foreign Securities held by each Selected
Foreign Sub-custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Securities and
other assets of the Fund, and, in the event that such institution deposits
Foreign Securities in a foreign securities depository, that it shall identify on
its books as belonging to the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
--------------------------------------------
agreements pursuant to which a foreign banking institution holds assets of the
Company's Funds (each, a "Foreign Sub-custodian Agreement") shall be
substantially in conformity with the provisions of Rule 17f-5.
(e) Access of Independent Auditors of the Company. Upon request
---------------------------------------------
of the Company, the Bank will use its best efforts to arrange for the Company's
independent auditors to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-custodian Agreement.
(f) Reports by the Bank. The Bank will supply to the Company
-------------------
from time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign Sub-custodians,
including but not limited to an identification of entities having possession of
the Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Accounts. Transactions with
----------------------------------------
respect to the assets of the Fund held by a Selected Foreign Sub-custodian shall
be effected pursuant to Proper Instructions from the Company to the Bank and
shall be effected in accordance with the applicable Foreign Sub-custodian
Agreement. If at any time any Foreign Portfolio Securities shall be registered
in the name of the nominee of the Selected Foreign Sub-custodian, the Company
agrees to hold any such nominee harmless from any liability by reason of the
registration of such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary, settlement
and payment for Foreign Securities received for the account of the Fund and
delivery of Foreign Securities maintained for the account of the Fund may be
effected in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Securities held hereunder, including, without limitation, the exercise of any
voting rights, subscription rights,
19
<PAGE>
redemption rights, exchange rights, conversion rights or tender rights, or any
other action in connection with any other right, interest or privilege with
respect to such Securities (collectively, the "Rights"), the Bank shall promptly
transmit to the Company or its investment adviser such information in connection
therewith as is made available to the Bank by the Foreign Sub-custodian, and the
Bank shall promptly forward to the applicable Foreign Sub-custodian any
instructions, forms or certifications with respect to such Rights, and any
instructions relating to the actions to be taken in connection therewith, as the
Bank shall receive pursuant to Proper Instructions. The Bank agrees to use its
best efforts to obtain and forward to the Company or its designated agent, Wells
Fargo Bank, information regarding Rights with respect to Foreign Securities held
hereunder. Notwithstanding the foregoing, the Bank shall have no further duty or
obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-custodians. Each Foreign
--------------------------------------------
Sub-custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and Company from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-custodian Agreement.
(i) Liability of Bank. The Bank shall have no more or less
-----------------
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-custodian employed hereunder than any such Selected Foreign Sub-
custodian has to the Bank and, without limiting the foregoing, the Bank shall
not be liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism, political risk (including, but not limited to, exchange control
restrictions, confiscation, insurrection, civil strife or armed hostilities)
other losses due to Acts of God, nuclear incident or any loss where the Selected
Foreign Sub-custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually
---------------------------
to the Company or any other Foreign Custody Manager, information concerning the
Selected Foreign Sub-custodians employed hereunder for use by the Company's
Board or such Foreign Custody Manager in evaluating such Selected Foreign Sub-
custodians to ensure compliance with the requirements of Rule 17f-5 of the 1940
Act.
(k) Tax Law. The Bank shall have no liability for any
-------
obligations now or hereafter imposed on the Trust, or its Funds, or the Bank as
custodian of the Trust by the tax laws of any jurisdiction. The sole
responsibility of the Bank with regard to such taxes shall be to use reasonable
efforts to assist the Company with respect to the withholding and payment by the
Company of such taxes and with respect to any claim for exemption or refund
under the tax law of jurisdictions for which the Company is entitled to such
exemptions or refunds.
20
<PAGE>
13.5 Insurance. The Bank shall use the same care with respect to the
---------
safekeeping of Portfolio Securities and cash of the Company's Funds held by it
as it uses in respect of its own similar property but need not maintain any
special insurance for the benefit of the Company.
13.6. Compensation and Reimbursement of Expenses. For providing
------------------------------------------
custodial services under this Agreement, the Bank shall be entitled to
compensation and reimbursement of expenses at such rates and on such terms as
are set forth on Schedule A. Notwithstanding Schedule A, the Bank shall not be
entitled to any compensation or reimbursement of expenses relating to fund
accounting services pursuant to this Agreement. Any such compensation or
reimbursement shall be payable pursuant to a separate Sub-Fund Accounting
Agreement, as may be in effect from time to time.
13.7 Advances by Bank. The Bank may, in its sole discretion, advance
----------------
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such
payments. Should such a payment or payments, with advanced funds, result in an
overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Fund payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Fund
shall provide the Bank with agreed upon compensating balances. The Company
agrees that the Bank shall have a continuing lien and security interest to the
extent of any overdraft or indebtedness, in and to any property at any time held
by it for the Fund's benefit or in which the Fund has an interest and which is
then in the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Company authorizes the Bank, in
its sole discretion, at any time to charge any overdraft or indebtedness,
together with interest due thereon against any balance of account standing to
the credit of the Fund on the Bank's books.
14. Termination.
-----------
(a) This Agreement shall be effective for an initial term of two
(2) years commencing upon the date hereof (the "Initial Term") unless earlier
terminated as provided in subsection (b) below. Thereafter, the Agreement may be
terminated at any time, without penalty upon sixty (60) days' written notice
delivered by either party to the other by means of registered mail, and upon the
expiration of such sixty (60) days, this Agreement will terminate; provided,
however, that the effective date of such termination may be postponed to a date
not more than ninety (90) days from the date of delivery of such notice (i) by
the Bank in order to prepare for the transfer by the Bank of all of the assets
of the Fund held hereunder, or (ii) by the Company in order to give it an
opportunity to make suitable arrangements for a successor custodian. At any time
after the termination of this Agreement, the Bank agrees to make available to
the Company, at its request, the records maintained by the Bank relating to the
performance of its duties as custodian and to preserve such records for the
periods prescribed in Rule 31a-2 under the 1940 Act.
(b) Notwithstanding subsection (a) above, either party hereto
may terminate this Agreement at any time prior to the expiration of the Initial
Term in the event that the other
21
<PAGE>
party violates any material provision of this Agreement, provided that the
violating party does not cure such violation within sixty (60) days of receipt
of written notice from the non-violating party of such violation.
(c) Notwithstanding subsection (a) above, the Company may
terminate this Agreement at any time prior to the expiration of the Initial Term
in the event that (i) the Board of Directors determines that the performance of
the Bank does not meet the reasonable satisfaction (considered in light of
industry standards) of the Board of Directors, provided that the Bank does not
cure such unsatisfactory performance within sixty (60) days of receipt of
written notice specifying such unsatisfactory performance; or (ii) if the Bank
becomes the subject of any state or federal bankruptcy proceeding that is not
dismissed within sixty (60) days of the initiation of such proceeding.
(d) In addition, notwithstanding anything herein to the
contrary, the Company may terminate this Agreement on sixty (60) days' notice at
any time prior to the expiration of the Initial Term, provided that, with
respect to any termination not covered by Subsections (b) and (c), it shall pay
to the Bank, as liquidated damages, all fees that would be due for the remainder
of the Initial Term, calculated as if asset levels remained constant from the
date notice of termination is given through the end of the Initial Term.
(e) In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Company. The obligation of the Bank to deliver and transfer over the assets of
the Company's Funds held by the Bank directly to such successor custodian will
commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Company does not select a successor custodian
within sixty (60) days from the date of delivery of notice of termination the
Bank may, subject to the provisions of subsection 14(c), deliver the Portfolio
Securities and cash of the Company's Fund held by the Bank to a bank or trust
company of its own selection that meets the requirements of Section 17(f)(1) of
the 1940 Act and has a reported capital, surplus and undivided profits
aggregating not less than $2,000,000, to be held as the property of the
Company's Funds under terms similar to those on which they were held by the
Bank, whereupon such bank or trust company so selected by the Bank will become
the successor custodian of such assets of the Company's Funds with the same
effect as though selected by the Board.
(f) Prior to the expiration of sixty (60) days after notice of
termination has been given, the Company may furnish the Bank with an order of
the Company advising that a successor custodian cannot be found willing and able
to act upon reasonable and customary terms and that there has been submitted to
the Fund's interestholders the question of whether the Fund will be liquidated
or will function without a custodian for the assets of the Fund. In that event
the Bank will deliver the Portfolio Securities and cash of the Company's Funds,
subject as aforesaid, in accordance with one of such alternatives that may be
approved by the requisite vote of shareholders, upon receipt by the Bank of a
copy of the minutes of the meeting of shareholders
22
<PAGE>
at which action was taken, certified by the Company's Secretary and an opinion
of counsel to the Company in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
---------------
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, in addition to all other remedies at law or in equity and without bond
or other security, to an injunction or injunctions to prevent breaches of this
provision.
16. Notices. Any notice or other instrument in writing authorized or
-------
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered, via registered U.S.
Mail or facsimile with written confirmation via registered U.S. Mail, to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Company or the Fund to:
Stagecoach Funds, Inc.
111 Center Street
Little Rock, AR 72201
Attention: Richard H. Blank, Jr.
With copies to:
C. David Messman
Wells Fargo Bank, N.A.
111 Sutter Street, 18th Floor
San Francisco, CA 94104
Marco E. Adelfio
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., #5500
Washington, DC 20006
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: Andrew Nesvet
With a copy to: John E. Henry, Esq. at the same address;
23
<PAGE>
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement, excluding Schedule A, may not be altered
----------
or amended, except by an instrument in writing, executed by both parties, and in
the case of the Company, any such material alteration or amendment will be
authorized and approved by its Board. Schedule A to this Agreement may be
amended from time to time with respect to the global custody fee schedule
therein as authorized by an appropriately executed amendment by both parties,
and in the case of the Company, any such amendment is ratified and approved by
its Board at its next regular meeting after such amendment is duly executed.
18. Parties. This Agreement will be binding upon and shall inure to the
-------
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Company
without the written consent of the Bank or by the Bank without the written
consent of the Company, authorized and approved by its Board; and provided
further that termination proceedings pursuant to Section 14 hereof will not be
deemed to be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
-------------
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. The Company and the Bank agree that the
-----------------------
Company's obligations under this Agreement shall not be binding upon any
Director, interestholder, officer, employee or agent of the Company
individually, or upon the assets and property of any other series of the
Company, but are binding only upon the assets and property of the Fund.
22. Single Agreement. This Agreement (including any exhibits, appendices
----------------
and schedules hereto) constitutes the entire agreement between the Bank and the
Company as to the subject matter hereof and supersedes any and all agreements,
representations and warranties, written or oral, regarding such subject matter
made prior to the time at which this Agreement has been executed and delivered
between the Bank and the Company.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first written above.
STAGECOACH FUNDS, INC.
By /s/ Richard H.Blank
------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
INVESTORS BANK & TRUST COMPANY
By /s/ Robert D. Mancuso
--------------------------
Name: Robert D. Mancuso
Title: Managing Director
Approved: April 29, 1997
Approved as amended: November 19, 1998
25
<PAGE>
Schedule A
----------
FEE SCHEDULE
Annual Fee
----------
For All Assets -- Domestic Custody 0.01%
Transaction Costs**
- -------------------
. DTC/Fed Book Entry $ 9
. Physical Securities 35
. Options and Futures 18
. GNMA Securities 30
. Principal Paydown 5
. Foreign Exchange 18***
. Outgoing Wires 7
. Incoming Wires 5
** This fee schedule assumes that trade information will be electronically
sent to IBT in the ISITC format.
*** There are no transaction costs for foreign exchange contracts executed by
IBT.
Foreign Subcustodian Fees
- -------------------------
. Incremental basis point and transaction fees will be charged for all
foreign assets for which IBT is custodian. The asset based fees and
transaction fees vary by country, based upon the global custody fee
schedule below. Local duties, script fees, registration, exchange fees, and
other market charges are included in out-of-pocket reimbursements.
MISCELLANEOUS
A. Out-of-Pocket Reimbursements
----------------------------
. These charges consist of:
- Printing, Delivery & Postage - Extraordinary Travel Expenses
- Legal Expenses - Pricing
- International Verification - InvestView
- Telecommunications - Third Party Review ($250/year)
- Customized Systems - Support Equipment
Development/Reporting
- Forms and Supplies
A-1
<PAGE>
B. Payment
-------
. The above fees will be paid by the Company five business days after
the invoice is mailed.
C. Systems
-------
. The details of any systems work will be determined after a thorough
business analysis. Systems work will be billed on a time and material
basis. This includes modifications to standard extracts or changes
needed to except trade information in a non-ISITC format.
D. Domestic Balance Credit
-----------------------
. The Company, on behalf of the Fund, may make use of balance credit
against fees (excluding out-of-pocket charges) for Fund balances
arising out of the custody relationship. The credit is based on
collected balances reduced by balances required to support the
activity charges of the accounts. The monthly earnings allowance is
equal to 75% of the 90-day T-bill rate.
E. Securities Lending, Foreign Exchange and Cash Management
--------------------------------------------------------
. For securities lending, revenue is split with the Fund and IBT on a
60% Fund/40% IBT basis.
GLOBAL CUSTODY FEE SCHEDULE
---------------------------
<TABLE>
<CAPTION>
Annual Basis
Country Point Charge Trade Charge
------- ------------ ------------
<S> <C> <C>
Argentina* 22.00 $ 75.00
Australia 5.00 $ 60.00
Austria 7.00 $ 60.00
Bangladesh 41.00 $150.00
Bermuda 20.00 $100.00
Belgium 7.00 $ 60.00
Bharain 41.00 $140.00
Botswana 50.00 $175.00
Brazil** 29.00 $ 80.00
Bulgaria 30.00 $ 75.00
Canada 5.00 $ 30.00
Chile*** 45.00 $100.00
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Annual Basis
Country Point Charge Trade Charge
------- ------------ ------------
<S> <C> <C>
China 20.00 $ 75.00
Colombia** 45.00 $140.00
Cyprus 50.00 $150.00
Czech Republic 20.00 $ 75.00
Denmark 5.00 $ 60.00
Ecuador 45.00 $100.00
Egypt 41.00 $100.00
Euroclear-Eurobonds 5.00 $ 20.00
Euroclear-Non-Eurobond Issues 5.00 $ 60.00
Finland 7.00 $ 70.00
France 5.00 $ 60.00
France Debt 5.00 $ 60.00
Germany 5.00 $ 30.00
Ghana 50.00 $200.00
Greece 45.00 $130.00
Hong Kong 10.00 $ 65.00
Hungary 50.00 $200.00
India**** 50.00 50BP
Indonesia 13.00 $ 65.00
Ireland 7.00 $ 60.00
Israel 50.00 $150.00
Italy Debt 5.00 $ 50.00
Italy Equity 5.00 $ 50.00
Japan 5.00 $ 30.00
Jordan 41.00 $120.00
Kazakhstan 45.00 $150.00
Kenya 50.00 $200.00
Korea 13.00 $ 65.00
Lebanon 41.00 $140.00
Lithuania 20.00 $ 75.00
Lithuania T-Bills 25.00 $ 75.00
Luxembourg 7.00 $ 60.00
Malaysia 10.00 $ 70.00
Mauritius 41.00 $140.00
Mexico 10.00 $ 40.00
Morocco 40.00 $150.00
Namibia 50.00 $200.00
Netherlands 5.00 $ 40.00
New Zealand 5.00 $ 60.00
Norway 7.00 $ 90.00
Oman 41.00 $140.00
Pakistan 41.00 $140.00
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
Annual Basis
Country Point Charge Trade Charge
------- ------------ ------------
<S> <C> <C>
Peru 50.00 $150.00
Philippines 13.00 $ 65.00
Poland - Equities 50.00 $150.00
Poland T Bills 29.00 $110.00
Portugal 20.00 $125.00
Russia - Equities 41.00 $250.00
Russia - MinFins 35.00 $140.00
Singapore 10.00 $ 65.00
Slovakia 20.00 $ 75.00
Slovenia 41.00 $120.00
South Africa 7.00 $ 40.00
Spain Equity & Corp. Debt 7.00 $ 60.00
Spain - Gov't. Debt 5.00 $ 60.00
Sri Lanka 13.00 $ 65.00
Swaziland 50.00 $200.00
Sweden 5.00 $ 40.00
Sweden Debt 5.00 $ 40.00
Switzerland 5.00 $ 60.00
Taiwan 13.00 $ 65.00
Thailand 10.00 $ 65.00
Turkey 41.00 $140.00
United Kingdom 5.00 $ 50.00
Uruguay 50.00 $150.00
Venezuela** 45.00 $140.00
Zambia 50.00 $200.00
Zimbabwe 50.00 $175.00
</TABLE>
* Bonds billed at residual value.
** Local administration fees included in custody fee.
*** Twenty (20) basis points local administration charge applied to
trades.
**** Trades bill at 50 basis points.
Out-of-pocket charges are passed through as actuals in all markets.
A-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Schedule A to
be amended by their respective officers thereunto duly authorized as of the day
and year written below.
STAGECOACH FUNDS, INC.
By /s/ Richard H. Blank, Jr.
---------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
INVESTORS BANK & TRUST COMPANY
By /s/ Robert D. Mancuso
------------------------
Name: Robert D. Mancuso
Title: Managing Director
Accepted by the
parties as amended on: November 19, 1998 -
Global Custody Fee Schedule
revised to include Bermuda,
Bulgaria, Kazakhstan,
Lithuania and Slovenia.
A-5
<PAGE>
[MORRISON & FOERSTER LLP LETTERHEAD]
June 30, 1999
Stagecoach Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Stagecoach Funds, Inc.
-------------------------
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 55 and Amendment No. 56 to the
Registration Statement on Form N-1A (SEC File Nos. 33-42927 and 811-6419) (the
"Registration Statement") of Stagecoach Funds, Inc. (the "Company") relating to
the Equity Funds of the Company.
We have been requested by the Company to furnish this opinion as Exhibit
10 to the Registration Statement.
We have examined documents relating to the organization of the Company
and its series and the authorization and issuance of shares of its Allocation
Funds. We have also verified with the Company's transfer agent the maximum
number of shares issued by the Company through February 1, 1999.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company, upon completion of
such corporate action as is deemed necessary or appropriate, will be duly and
validly authorized by such corporate action and assuming delivery by sale or in
accord with the Company's dividend reinvestment plan in accordance with the
description set forth in the Fund's current prospectus under the Securities Act
of 1933, as amended, the Shares will be legally issued, fully paid and
nonassessable by the Company.
<PAGE>
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to the description of advice rendered by our firm under the heading
"Counsel" in the Statement of Additional Information, which is included as part
of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Stagecoach Funds, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information.
/s/ KPMG LLP
San Francisco, California
June 29, 1999
